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Urban Bank vs. Pea G.R. No.

145817 1 of 40

Republic of the Philippines


SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 145817 October 19, 2011
URBAN BANK, INC, Petitioner,
vs.
MAGDALENO M. PEA, Respondent.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 145822
DELFIN C. GONZALEZ, JR., BENJAMIN L. DE LEON, and ERIC L. LEE, Petitioners,
vs.
MAGDALENO M. PEA, Respondent.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 162562
MAGDALENO M. PEA, Petitioner,
vs.
URBAN BANK, INC., TEODORO BORLONGAN, DELFIN C. GONZALEZ, JR., BENJAMIN L. DE
LEON, P. SIERVO H. DIZON, ERIC L. LEE, BEN T. LIM, JR., CORAZON BEJASA, and ARTURO
MANUEL, JR., Respondents.
DECISION
SERENO, J.:
These consolidated petitions began as a simple case for payment of services rendered and for reimbursement of
costs. The case spun a web of suits and counter-suits because of: (1) the size of the award for agents fee rendered
in favor of Atty. Magdaleno Pea (Pea) PhP24,000,000 rendered by the trial court; (2) the controversial
execution of the full judgment award of PhP28,500,000 (agents fee plus reimbursement for costs and other
damages) pending appeal; and (3) the finding of solidary liability against Urban Bank, Inc., and several of its
corporate officers and directors together with the concomitant levying and sale in execution of the personal (even
conjugal) properties of those officers and directors; and (4) the fact that assets with declared conservative values of
at least PhP181 Million which, together with those with undeclared values could reach very much more than such
amount, were levied or sold on execution pending appeal to satisfy the PhP28.5 Million award in favor of Atty.
Pea. Incidentally, two supersedeas bonds worth PhP80 Million (2.8 times the amount of the judgment) were filed
by Urban Bank and some of its officers and directors to stay the execution pending appeal.
Had the four attendant circumstances not afflicted the original case, it would have been an open-and-shut review
where this Court, applying even just the minimum equitable principle against unjust enrichment would have easily
affirmed the grant of fair recompense to Atty. Pea for services he rendered for Urban Bank if such had been
ordered by the trial court.
Urban Bank vs. Pea G.R. No. 145817 2 of 40

That Atty. Pea should be paid something by Urban Bank is not in dispute the Court of Appeals (CA) and the
Regional Trial Court (RTC) of Bago City, agreed on that. What they disagreed on is the basis and the size of the
award. The trial court claims that the basis is an oral contract of agency and the award should be PhP28,5000,000;
while, the appellate court said that Atty. Pea can only be paid under the legal principle against unjust enrichment,
and the total award in his favor should only amount to PhP3,000,000.
In the eyes of the trial court, the controlling finding is that Atty. Pea should be believed when he testified that in a
telephone conversation, the president of Urban Bank, Teodoro Borlongan, a respondent herein, agreed to pay him
for his services 10% of the value of the property then worth PhP240,000,000, or PhP24,000,000. Costs and other
awards additionally amount to PhP4,500,000, for a total award of PhP28,500,000 according to the trial court. To
the Court of Appeals, such an award has no basis, as in fact, no contract of agency exists between Atty. Pea and
Urban Bank. Hence, Atty. Pea should only be recompensed according to the principle of unjust enrichment, and
that he should be awarded the amount of PhP3,000,000 only for his services and reimbursements of costs.
The disparity in the size of the award given by the trial court vis--vis that of the Court of Appeals (PhP28,500,000
v. PhP3,000,000) must be placed in the context of the service that Atty. Pea proved that he rendered for Urban
Bank. As the records bear, Atty. Peas services consisted of causing the departure of unauthorized sub-tenants in
twenty-three commercial establishments in an entertainment compound along Roxas Boulevard. It involved the
filing of ejectment suits against them, Peas personal defense in the counter-suits filed against him, his settlement
with them to the tune of PhP1,500,000, which he advanced from his own funds, and his retention of security guards
and expenditure for other costs amounting to more or less PhP1,500,000. There is no claim by Atty. Pea of any
service beyond those. He claims damages from the threats to his life and safety from the angry tenants, as well as a
vexatious collection suit he had to face from a creditor-friend from whom he borrowed PhP3,000,000 to finance the
expenses for the services he rendered Urban Bank.
At the time the award of PhP28,500,000 by the trial court came out in 1999, the net worth of Urban Bank was
PhP2,219,781,104. While the bank would be closed by the Bangko Sentral ng Pilipinas (BSP) a year later for
having unilaterally declared a bank holiday contrary to banking rules, there was no reason to believe that at the
time such award came out it could not satisfy a judgment of PhP28,500,000, a sum that was only 1% of its net
worth, and a miniscule 0.2% of its total assets of PhP11,933,383,630. In fact, no allegation of impending
insolvency or attempt to abscond was ever raised by Atty. Pea and yet, the trial court granted execution pending
appeal.
Interestingly, Pea had included as co-defendants with Urban Bank in the RTC case, several officers and board
directors of Urban Bank. Not all board directors were sued, however. With respect to those included in the
complaint, other than against Teodoro Borlongan, Corazon Bejasa, and Arturo Manuel, no evidence was ever
offered as to their individual actions that gave rise to Atty. Peas cause of action the execution of the agency
contract and its breach and yet, these officers and directors were made solidarily liable by the trial court with
Urban Bank for the alleged breach of the alleged corporate contract of agency. Execution pending appeal was also
granted against them for this solidary liability resulting in the levy and sale in execution pending appeal of not only
corporate properties of Urban Bank but also personal properties of the individual bank officers and directors. It
would have been interesting to find out what drove Atty. Pea to sue the bank officers and directors of Urban Bank
and why he chose to sue only some, but not all of the board directors of Urban Bank, but there is nothing on the
record with which this analysis can be pursued.
Urban Bank vs. Pea G.R. No. 145817 3 of 40

Before us are: (a) the Petitions of Urban Bank (G. R. No. 145817) and the De Leon Group (G R. No. 145822)
questioning the propriety of the grant of execution pending appeal, and (b) the Petition of Atty. Pea (G. R. No.
162562) assailing the CAs decision on the substantive merits of the case with respect to his claims of
compensation based on an agency agreement.
Ordinarily, the final resolution by the Supreme Court of an appeal from a trial court decision would have
automatic, generally-understood consequences on an order issued by the trial court for execution pending appeal.
But this is no ordinary case, and the magnitude of the disproportions in this case is too mind-boggling that this
Court must exert extra effort to correct whatever injustices have been occasioned in this case. Thus, our
dispositions will include detailed instructions for several judicial officials to implement.
At core, these petitions can be resolved if we answer the following questions:
1. What is the legal basis for an award in favor of Pea for the services he rendered to Urban Bank? Should
it be a contract of agency the fee for which was orally agreed on as Pea claims? Should it be the
application of the Civil Code provisions on unjust enrichment? Or is it to be based on something else or a
combination of the legal findings of both the RTC and the CA? How much should the award be?
2. Are the officers and directors of Urban Bank liable in their personal capacities for the amount claimed by
Pea?
3. What are the effects of our answers to questions (1) and (2), on the various results of the execution
pending appeal that happened here?
Factual Background of the Controversy
Urban Bank, Inc. (both petitioner and respondent in these two consolidated cases), was a domestic Philippine
corporation, engaged in the business of banking. The eight individual respondents in G. R. No. 162562 were
officers and members of Urban Banks board of directors, who were sued in their official and personal capacities.
On the other hand, Benjamin L. De Leon, Delfin C. Gonzalez, Jr., and Eric L. Lee, (hereinafter the de Leon
Group), are the petitioners in G. R. No. 145822 and are three of the same bank officers and directors, who had
separately filed the instant Petition before the Court.
Petitioner-respondent Atty. Magdaleno M. Pea (Pea) is a lawyer by profession and was formerly a stockholder,
director and corporate secretary of Isabel Sugar Company, Inc. (ISCI).
ISCI owned a parcel of land located in Pasay City (the Pasay property). In 1984, ISCI leased the Pasay property for
a period of 10 years. Without its consent and in violation of the lease contract, the lessee subleased the land to
several tenants, who in turn put up 23 establishments, mostly beer houses and night clubs, inside the compound. In
1994, a few months before the lease contract was to expire, ISCI informed the lessee and his tenants that the lease
would no longer be renewed and that it intended to take over the Pasay property for the purpose of selling it.
Two weeks before the lease over the Pasay property was to expire, ISCI and Urban Bank executed a Contract to
Sell, whereby the latter would pay ISCI the amount of PhP241,612,000 in installments for the Pasay property. Both
parties agreed that the final installment of PhP25,000,000 would be released by the bank upon ISCIs delivery of
full and actual possession of the land, free from any tenants. In the meantime, the amount of the final installment
would be held by the bank in escrow. The escrow provision in the Contract to Sell, thus, reads:
"The SELLER (ISCI) agrees that from the proceeds of the purchase prices of the subject Property (Pasay property),
Urban Bank vs. Pea G.R. No. 145817 4 of 40

the BUYER (Urban Bank) shall withhold the amount of PHP 25,000,000.00 by way of escrow and shall release
this amount to the SELLER only upon its delivery to the BUYER of the full and actual possession and control of
the Subject Property, free from tenants, occupants, squatters or other structures or from any liens, encumbrances,
easements or any other obstruction or impediment to the free use and occupancy by the buyer of the subject
Property or its exercise of the rights to ownership over the subject Property, within a period of sixty (60) days from
the date of payment by the BUYER of the purchase price of the subject Property net of the amounts authorized to
be deducted or withheld under Item II (a) of this Contract. (Emphasis supplied)
ISCI then instructed Pea, who was its director and corporate secretary, to take over possession of the Pasay
property against the tenants upon the expiration of the lease. ISCIs president, Mr. Enrique G. Montilla III
(Montilla), faxed a letter to Pea, confirming the latters engagement as the corporations agent to handle the
eviction of the tenants from the Pasay property, to wit:
MEMORANDUM

TO: Atty. Magdaleno M. Pena

Director

FROM: Enrique G. Montilla III

President

DATE: 26 November 1994

You are hereby directed to recover and take possession of the property of the corporation situated at
Roxas Boulevard covered by TCT No. 5382 of the Register of Deeds for Pasay City immediately upon
the expiration of the contract of lease over the said property on 29 November 1994. For this purpose
you are authorized to engage the services of security guards to protect the property against intruders.
You may also engage the services of a lawyer in case there is a need to go to court to protect the said
property of the corporation. In addition you may take whatever steps or measures are necessary to
ensure our continued possession of the property.

(sgd.) ENRIQUE G. MONTILLA III


President

On 29 November 1994, the day the lease contract was to expire, ISCI and Urban Bank executed a Deed of
Absolute Sale over the Pasay property for the amount agreed upon in the Contract to Sell, but subject to the above
escrow provision. The title to the land was eventually transferred to the name of Urban Bank on 05 December
1994.
On 30 November 1994, the lessee duly surrendered possession of the Pasay property to ISCI, but the unauthorized
sub-tenants refused to leave the area. Pursuant to his authority from ISCI, Pea had the gates of the property closed
to keep the sub-tenants out. He also posted security guards at the property, services for which he advanced
payments. Despite the closure of the gates and the posting of the guards, the sub-tenants would come back in the
evening, force open the gates, and proceed to carry on with their businesses. On three separate occasions, the sub-
tenants tried to break down the gates of the property, threw stones, and even threatened to return and inflict greater
harm on those guarding it.
Urban Bank vs. Pea G.R. No. 145817 5 of 40

In the meantime, a certain Marilyn G. Ong, as representative of ISCI, faxed a letter to Urban Bank addressed to
respondent Corazon Bejasa, who was then the banks Senior Vice-President requesting the issuance of a formal
authority for Pea. Two days thereafter, Ms. Ong faxed another letter to the bank, this time addressed to its
president, respondent Teodoro Borlongan. She repeated therein the earlier request for authority for Pea, since the
tenants were questioning ISCIs authority to take over the Pasay property.
In response to the letters of Ms. Ong, petitioner-respondent bank, through individual respondents Bejasa and Arturo
E. Manuel Senior Vice-President and Vice-President, respectively advised Pea that the bank had noted the
engagement of his services by ISCI and stressed that ISCI remained as the lawyers principal.
To prevent the sub-tenants from further appropriating the Pasay property, petitioner-respondent Pea, as director
and representative of ISCI, filed a complaint for injunction (the First Injunction Complaint) with the RTC-Pasay
City. Acting on ISCIs prayer for preliminary relief, the trial court favorably issued a temporary restraining order
(TRO), which was duly implemented. At the time the First Injunction Complaint was filed, a new title to the Pasay
property had already been issued in the name of Urban Bank.
On 19 December 1994, when "information reached the judge that the Pasay property had already been transferred
by ISCI to Urban Bank, the trial court recalled the TRO and issued a break-open order for the property. According
to Pea, it was the first time that he was apprised of the sale of the land by ISCI and of the transfer of its title in
favor of the bank." It is not clear from the records how such information reached the judge or what the break-open
order was in response to.
On the same day that the TRO was recalled, petitioner-respondent Pea immediately contacted ISCIs president,
Mr. Montilla, who in turn confirmed the sale of the Pasay property to Urban Bank. Pea told Mr. Montilla that
because of the break-open order of the RTC-Pasay City, he (Pea) would be recalling the security guards he had
posted to secure the property. Mr. Montilla, however, asked him to suspend the planned withdrawal of the posted
guards, so that ISCI could get in touch with petitioner-respondent bank regarding the matter.
Later that same day, Pea received a telephone call from respondent Bejasa. After Pea informed her of the
situation, she allegedly told him that Urban Bank would be retaining his services in guarding the Pasay property,
and that he should continue his efforts in retaining possession thereof. He insisted, however, on talking to the
Banks president. Respondent Bejasa gave him the contact details of respondent Borlongan, then president of
Urban Bank.
The facts regarding the following phone conversation and correspondences are highly-controverted. Immediately
after talking to respondent Bejasa, Pea got in touch with Urban Banks president, respondent Borlongan. Pea
explained that the policemen in Pasay City were sympathetic to the tenants and were threatening to force their way
into the premises. He expressed his concern that violence might erupt between the tenants, the city police, and the
security guards posted in the Pasay property. Respondent Borlongan supposedly assured him that the bank was
going to retain his services, and that the latter should not give up possession of the subject land. Nevertheless,
petitioner-respondent Pea demanded a written letter of authority from the bank. Respondent Borlongan acceded
and instructed him to see respondent Bejasa for the letter.
In the same telephone conversation, respondent Borlongan allegedly asked Pea to maintain possession of the
Pasay property and to represent Urban Bank in any legal action that might be instituted relative to the property.
Pea supposedly demanded 10% of the market value of the property as compensation and attorneys fees and
Urban Bank vs. Pea G.R. No. 145817 6 of 40

reimbursement for all the expenses incurred from the time he took over land until possession was turned over to
Urban Bank. Respondent Borlongan purportedly agreed on condition that possession would be turned over to the
bank, free of tenants, not later than four months; otherwise, Pea would lose the 10% compensation and attorneys
fees.
Later that afternoon, Pea received the banks letter dated 19 December 1994, which was signed by respondents
Bejasa and Manuel, and is quoted below:
This is to confirm the engagement of your services as the authorized representative of Urban Bank, specifically to
hold and maintain possession of our abovecaptioned property [Pasay property] and to protect the same from former
tenants, occupants or any other person who are threatening to return to the said property and/or interfere with your
possession of the said property for and in our behalf.
You are likewise authorized to represent Urban Bank in any court action that you may institute to carry out the
aforementioned duties, and to prevent any intruder, squatter or any other person not otherwise authorized in writing
by Urban [B]ank from entering or staying in the premises. (Emphasis supplied)
On even date, ISCI sent Urban Bank a letter, which acknowledged ISCIs engagement of Pea and commitment to
pay for any expenses that may be incurred in the course of his services. ISCIs letter reads:
This has reference to your property located along Roxas Boulevard, Pasay City [Pasay property] which you
purchased from Isabela Sugar Company under a Deed of Absolute Sale executed on December 1, 1994.
In line with our warranties as the Seller of the said property and our undertaking to deliver to you the full and
actual possession and control of said property, free from tenants, occupants or squatters and from any obstruction
or impediment to the free use and occupancy of the property by Urban Bank, we have engaged the services of Atty.
Magdaleno M. Pea to hold and maintain possession of the property and to prevent the former tenants or occupants
from entering or returning to the premises. In view of the transfer of the ownership of the property to Urban Bank,
it may be necessary for Urban Bank to appoint Atty. Pea likewise as its authorized representative for purposes of
holding/maintaining continued possession of the said property and to represent Urban Bank in any court action that
may be instituted for the abovementioned purposes.
It is understood that any attorneys fees, cost of litigation and any other charges or expenses that may be incurred
relative to the exercise by Atty. Pea of his abovementioned duties shall be for the account of Isabela Sugar
Company and any loss or damage that may be incurred to third parties shall be answerable by Isabela Sugar
Company. (Emphasis supplied)
The following narration of subsequent proceedings is uncontroverted.
Pea then moved for the dismissal of ISCIs First Injunction Complaint, filed on behalf of ISCI, on the ground of
lack of personality to continue the action, since the Pasay property, subject of the suit, had already been transferred
to Urban Bank. The RTC-Pasay City dismissed the complaint and recalled its earlier break-open order.
Thereafter, petitioner-respondent Pea, now in representation of Urban Bank, filed a separate complaint (the
Second Injunction Complaint) with the RTC-Makati City, to enjoin the tenants from entering the Pasay property.
Acting on Urban Banks preliminary prayer, the RTC-Makati City issued a TRO.
While the Second Injunction Complaint was pending, Pea made efforts to settle the issue of possession of the
Pasay property with the sub-tenants. During the negotiations, he was exposed to several civil and criminal cases
Urban Bank vs. Pea G.R. No. 145817 7 of 40

they filed in connection with the task he had assumed for Urban Bank, and he received several threats against his
life. The sub-tenants eventually agreed to stay off the property for a total consideration of PhP1,500,000. Pea
advanced the payment for the full and final settlement of their claims against Urban Bank.
Pea claims to have borrowed PhP3,000,000 from one of his friends in order to maintain possession thereof on
behalf of Urban Bank. According to him, although his creditor-friend granted him several extensions, he failed to
pay his loan when it became due, and it later on became the subject of a separate collection suit for payment with
interest and attorneys fees. This collection suit became the basis for Atty. Peas request for discretionary
execution pending appeal later on.
On 07 February 1995, within the four-month period allegedly agreed upon in the telephone conversation, Pea
formally informed Urban Bank that it could already take possession of the Pasay property. There was however no
mention of the compensation due and owed to him for the services he had rendered.
On 31 March 1995, the bank subsequently took actual possession of the property and installed its own guards at the
premises.
Pea thereafter made several attempts to contact respondents Borlongan and Bejasa by telephone, but the bank
officers would not take any of his calls. On 24 January 1996, or nearly a year after he turned over possession of the
Pasay property, Pea formally demanded from Urban Bank the payment of the 10% compensation and attorneys
fees allegedly promised to him during his telephone conversation with Borlongan for securing and maintaining
peaceful possession of the property.
Proceedings on the Complaint for Compensation
On 28 January 1996, when Urban Bank refused to pay for his services in connection with the Pasay property, Pea
filed a complaint for recovery of agents compensation and expenses, damages and attorneys fees in RTC-Bago
City in the province of Negros Occidental. Interestingly, Pea sued only six out of the eleven members of the
Board of the Directors of Urban Bank. No reason was given why the six directors were selected and the others
excluded from Peas complaint. In fact, as pointed out, Atty. Pea mistakenly impleaded as a defendant, Ben Y.
Lim, Jr., who was never even a member of the Board of Directors of Urban Bank; while, Ben T. Lim, Sr., father
and namesake of Ben Y. Lim, Jr., who had been a director of the bank, already passed away in 1997.
In response to the complaint of Atty. Pea, Urban Bank and individual bank officers and directors argued that it
was ISCI, the original owners of the Pasay property, that had engaged the services of Pea in securing the
premises; and, consequently, they could not be held liable for the expenses Pea had incurred.
On 28 May 1999, the RTC-Bago City ruled in favor of Pea, after finding that an agency relationship had indeed
been created between him and Urban Bank. The eight directors and bank officers were found to be solidarily liable
with the bank for the payment of agencys fees. The trial court thus ordered Urban Bank and all eight defendant
bank directors and officers whom Pea sued to pay the total amount of PhP28,500,000 (excluding costs of suit):
WHEREFORE, premised from the foregoing, judgment is hereby rendered ordering defendants to pay plaintiff
jointly and severally the following amounts:
1. P24,000,000 as compensation for plaintiffs services plus the legal rate of interest from the time of
demand until fully paid;
2. P3,000,000 as reimbursement of plaintiffs expenses;
Urban Bank vs. Pea G.R. No. 145817 8 of 40

3. P1,000,000 as and for attorneys fees;


4. P500,000 as exemplary damages;
5. Costs of suit.
SO ORDERED.
Urban Bank and the individual defendant bank directors and officers filed a common Notice of Appeal, which was
given due course. In the appeal, they questioned the factual finding that an agency relationship existed between the
bank and Pea.
Although they put up a single defense in the proceedings in the lower court, Urban Bank and individual defendants
contracted different counsel and filed separate Briefs on appeal in the appellate court.
In its Brief, Urban Bank assigned as errors the trial courts reliance on the purported oral contract of agency and
Peas claims for compensation during the controverted telephone conversation with Borlongan, which were
allegedly incredible.
Meanwhile, Benjamin L. de Leon, Delfin Gonzalez, Jr., and Eric L. Lee (the De Leon Group), the petitioners in the
instant Petition docketed as G. R. No. 145822, argued that, even on the assumption that there had been an agency
contract with the bank, the trial court committed reversible error in holding them as bank directors solidarily
liable with the corporation.
On the other hand, Teodoro Borlongan, Corazon M. Bejasa, Arturo Manuel, Jr., Ben Y. Lim, Jr., and P. Siervo H.
Dizon (the Borlongan Group) reiterated similar arguments as those of the De Leon Group, adding that the claimed
compensation of 10% of the purchase price of the Pasay property was not reasonable.
Pea refuted all of their arguments and prayed that the trial courts Decision be affirmed.
Acting favorably on the appeal, the Court of Appeals annulled the Decision of the RTC-Bago City and ruled that no
agency relationship had been created. Nevertheless, it ordered Urban Bank to reimburse Pea for his expenses and
to give him reasonable compensation for his efforts in clearing the Pasay property of tenants in the amount of
PhP3,000,000, but absolved the bank directors and officers from solidary liability. The dispositive portion of the
CA decision reads as follows:
WHEREFORE, in view of the foregoing considerations, the May 28, 2000 Decision [sic] and the October 19, 2000
[sic] Special Order of the RTC of Bago City, Branch 62, are hereby ANNULLED AND SET ASIDE. However, the
plaintiff-appellee [Pea] in CA GR CV No. 65756 is awarded the amount of P3 Million as reimbursement for his
expenses as well as reasonable compensation for his efforts in clearing Urban Banks property of unlawful
occupants. The award of exemplary damages, attorneys fees and costs of suit are deleted, the same not having
been sufficiently proven. The petition for Indirect Contempt against all the respondents is DISMISSED for utter
lack of merit. (Emphasis supplied)
Pea duly filed a Motion for Reconsideration of the unfavorable CA Decision. The appellate court, however,
denied his motion. The CA Decision and Resolution were appealed by Pea to this Court, through one of the three
consolidated Rule 45 Petitions before us (G. R. No. 162562).
Execution Pending Appeal
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On 07 June 1999, prior to the filing of the notice of appeal of Urban Bank and individual bank officers, Pea
moved for execution pending appeal of the Decision rendered by the RTC-Bago City, which had awarded him a
total of PhP28,500,000 in compensation and damages.
In supporting his prayer for discretionary execution, Pea cited the pending separate civil action for collection filed
against him by his creditor-friend, who was demanding payment of a PhP3,000,000 loan. According to Pea, he
had used the proceeds of the loan for securing the banks Pasay property. No other reason for the prayer for
execution pending appeal was given by Pea other than this collection suit.
In opposition to the motion, Urban Bank countered that the collection case was not a sufficient reason for allowing
execution pending appeal.
On 29 October 1999, the RTC-Bago City, through Judge Henry J. Trocino, favorably granted Peas motion and
issued a Special Order authorizing execution pending appeal. In accordance with this Special Order, Atty.
Josephine Mutia-Hagad, the clerk of court and ex officio sheriff, issued a Writ of Execution on the same day. The
Special Order and Writ of Execution were directed at the properties owned by Urban Bank as well as the properties
of the eight individual bank directors and officers.
On 04 November 1999, affected by the trial courts grant of execution pending appeal, Urban Bank filed a Rule 65
Petition with the CA to enjoin the Special Order and Writ of Execution issued by the trial court with a prayer for a
TRO.
On 09 November 1999, the appellate court favorably granted the TRO and preliminarily prohibited the
implementation of the Special Order and Writ of Execution.
On 12 January 2000, the CA eventually granted Urban Banks Rule 65 Petition, and the RTCs Special Order and
Writ of Execution, which permitted execution pending appeal, were annulled. The appellate court ruled:
WHEREFORE, the instant petition is GRANTED. The Special Order and writ of execution, both dated October 29,
1999, are ANNULLED and SET ASIDE.
Respondents are directed to desist from further implementing the writ of execution and to lift the garnishment and
levy made pursuant thereto.
On 02 February 2000, Pea moved for the reconsideration of the CAs Decision; while petitioners filed their
corresponding Comment/Opposition
thereto.
During the pendency of Peas Motion for Reconsideration, Urban Bank declared a bank holiday on 26 April 2000
and was placed under receivership of the Philippine Deposit Insurance Corporation (PDIC).
In its Amended Decision dated 18 August 2000, the CA favorably granted Peas Motion for Reconsideration, and
reversed its earlier Decision to allow execution pending appeal. The appellate court found that the bank holiday
declared by the BSP after the promulgation of its earlier Decision, PDICs receivership of Urban Bank, and the
imminent insolvency thereof constituted changes in the banks conditions that would justify execution pending
appeal.
On 29 August 2000, Urban Bank and its officers moved for the reconsideration of the Amended Decision. The De
Leon Group subsequently filed several Supplemental Motions for Reconsideration. Thereafter, respondents
Urban Bank vs. Pea G.R. No. 145817 10 of 40

Teodoro Borlongan and Corazon M. Bejasa also filed their separate Supplemental Motion for Reconsideration, as
did petitioner Ben T. Lim, Jr.
On 19 October 2000, the Court of Appeals denied the motion for reconsideration for lack of merit and the other
subsequent Supplemental Motions for Reconsideration for being filed out of time. The appellate court also ordered
Pea to post an indemnity bond. The Amended Decision and the Resolution were the subjects of several Rule 45
Petitions filed by Urban Bank and individual petitioners (G. R. Nos. 145817, 145818 and 145822).
On the same day the CA denied its Motion for Reconsideration, the De Leon Group immediately moved for the
stay of execution pending appeal upon the filing of a supersedeas bond.
On 31 October 2000, the CA granted the stay of the execution upon the filing by the De Leon Group of a
PhP40,000,000 bond in favor of Pea. Pea moved for the reconsideration of the stay order.
1avvphil
In its Resolution dated 08 December 2000, the appellate court denied Peas Motion for Reconsideration and a stay
order over the execution pending appeal was issued in favor of the De Leon Group, after they had filed their
supersedeas bond. The stay of execution pending appeal, however, excluded Urban Bank.
On 08 December 2000, Pea posted his indemnity bond as required by the CA.
As mentioned earlier, Urban Bank, the De Leon Group, and the Borlongan Group filed around December 2000
separate Rule 45 Petitions in this Court, to assail the unfavorable CA Amended Decision and Resolution that
affirmed the execution pending appeal. The details of these Rule 45 Petitions will be discussed in detail later on.
In the meantime, Export and Industry Bank (EIB) submitted its proposal for rehabilitation of Urban Bank to the
BSP, and requested that the troubled bank be removed from receivership of the PDIC. On 12 July 2001, or almost a
year after the Court of Appeals amended its decision to allow execution pending appeal, the rehabilitation plan of
Urban Bank was approved by the Monetary Board of the BSP. Thus, the Monetary Board subsequently lifted
PDICs statutory receivership of the bank.
On 14 September 2001, Urban Bank, trying to follow the lead of the De Leon Group, made a similar request with
the Court of Appeals for approval of its own supersedeas bond, for the same amount of PhP40,000,000, and prayed
that the execution of the RTC-Bago Citys Decision against it be stayed as well.
Sometime in September and October 2001, Urban Bank began receiving notices of levy and garnishment over its
properties. After it received Notice of the impending public execution sale of its shares in the Tagaytay Highlands
International Golf Club, Urban Bank reiterated its request for the approval of the supersedeas bond with the Court
of Appeals and the issuance of the corresponding stay order.
The appellate court, however, merely noted Urban Banks motion on the ground that there was no showing whether
a petition to the Supreme Court had been filed or given due course or denied.
After the denial by the Court of Appeals of Urban Banks motion for approval of its supersedeas bond, some of the
levied properties of Urban Bank and the other bank officers were sold on public auction. The table below lists the
properties that appear on record to have been levied and/or sold on execution pending appeal and the approximate
value of some of these properties. They do not include properties covered by the Petition docketed as G. R. No.
145818.
Urban Bank vs. Pea G.R. No. 145817 11 of 40

Table of Levied, Garnished and/or Executed Properties Pending Appeal


1avvphi1
Owner/ Property Estimated Value or Total Remarks
Defendant Description Price at Public Amount
Auction

Urban Bank Three Club Shares As of 06 December


Tagaytay Highlands 1999, one share was
International Golf selling at P1.6 4,800,000
Club Million.

Three Club Shares As of 06 December 2000000 Atty. Pea was


in Makati Sports, 1999, MSCI Club one of the
Club, Inc. (MSCI) Shares "A" and "B" winning bidders
[Covered by Stock were selling at in the auction
Certificate Nos. A- PhP650,000 and sale together
1893, A-2305 and PhP700,000, with his creditor
B-762] respectively. friend, Roberto
Ignacio, and
Atty. Ramon
Ereeta.

85 Condominium The highest bid 85,000,000 Intervenor


Units in the Urban price obtained for Unimega
Bank Plaza, Makati the condominium purchased the 10
City units was PhP1M at condominium
the time of the units in the
execution sale. auction sale for
P1M each or a
total of P10 M.

A 155 sqm. 12,400,000


condominium unit,
Makati City (CCT
No. 57697)

Estimates are based


A 12.5 sqm. on report of Urban 500,000
condominium Bank
parking space
(Parking Three,
Unit P-46) in
Makati City (CCT
No. 57698)

A 64,677 sqm. land Value based on 35,572,350


in Tagaytay City estimate of Urban
Urban Bank vs. Pea G.R. No. 145817 12 of 40

(TCT No. 20471) Bank

Notice of Sale on
Borlongans club
One Club Share in Execution on
share was estimated
Manila Polo Club Personal
to be valued at 1,000,000
(No. 3433) Property dated
P1,000,000.
25 August 2000

One Club Share in One club share was 500,000


Subic Bay Yacht estimated to be
Club valued at P500,000.

One Club Share in As of 06 December 870,000


Teodoro Baguio Country 1999, one share was
Borlongan Club selling at P870,000.

One Club Share in As of 06 December 650,000


MSCI 1999, MSCI Club
Shares "A" and "B"
were selling at
PhP650,000 and
PhP700,000
respectively.

Real Property No estimate


available on record.

Delfin C. Notice of Sale on


Gonzales club
Gonzales, Jr. One Club Share in Execution on
share was estimated
Manila Polo Club Personal
to be valued at 4,000,000
(No. 3818) Property dated
P4,000,000.
25 August 2000

One Club Share in Gonzales club 1,077,000


Baguio Country share was estimated
Club. to be valued at
P1,077,000.

One Club Share in Gonzales club 2,000,000


Alabang Country share was estimated
Club (Member No. to be valued at
550) P2,000,000.

30,585 shares of P20.00 per share 611,700


stock in D. C.
Urban Bank vs. Pea G.R. No. 145817 13 of 40

Gonzales, Jr., Inc.

40 Shares of stock P50.00 per share 2,000


in D. C. Gonzales,
Jr., Inc.

De Leons Share
One Club Share in Notice of Sale on
was estimated at P4
Manila Polo Club Execution on
M for the share and
(with Associate Personal
P1.05 M for the 5,050,000
Membership) [No. Property dated
associate
0597] 25 August 2000
membership.

Benjamin L. One Club Share in De Leons share 450,000


de Leon MSCI (Stock was estimated at
Certificate No. A- P450,000.
175)

One Club Share in As of 06 December 870,000


Baguio Country 1999, one share was
Club (5523) selling at least
P870,000.

No records
available as to
P. Siervo G. properties levied,
Dizon garnished or
executed pending
appeal.

Eric L. Lee Notice of Sale on


Lees club share
One Club Share in Execution on
was estimated to be
Manila Polo Club Personal
valued at 4,000,000
(2038) Property dated
P4,000,000.
25 August 2000

One Club Share in Lees club share 15,750,000


Manila Golf Club, was estimated to be
Inc. valued at
P15,750,000.

One Club Share in Lees club share 2,000,000


Sta. Elena Golf was estimated to be
Club, Inc. (Class valued at
"A" Share) P2,000,000.
Urban Bank vs. Pea G.R. No. 145817 14 of 40

Two Club Shares in Lees club shares 1,000,000 Notice of Sale on


Tagaytay Highlands were estimated to Execution on
Intl Golf Club, Inc. be valued at Personal
P1,000,000. Property dated
25 August 2000

One Club Share in Lees club share 500,000


Subic Yacht Club was estimated to be
valued at P500,000.

60,757 Shares of P20.00 per share 1,214,140


stock in EQL
Properties, Inc.

40 Shares of stock P50.00 per share 2,000


in EQL Properties,
Inc.

Cash garnished 100,000


from BPI Account

No records
available as to
Ben T. Lim, properties levied,
Jr. garnished or
executed pending
appeal.

Corazon
Real Property No estimated value.
Bejasa

Arturo
Real Property No estimated value.
Manuel, Jr.,

TOTAL VALUE 181,919,190

The sum of PhP181,919,190 does not include many other properties and it is not difficult to believe that the total
value covered reached more than that. In summary, the estimated values and/or purchase prices at the auction sale
of the properties of Urban Bank and its officers amounted to no less than PhP181,919,190 already. This amounts to
almost six times the value of the award given by the trial court. Otherwise stated, Pea, as judgment creditor, was
overly secured by the levied and/or garnished properties for the amount of PhP28,500,000, where the judgment
award was still subject of reversal on appeal.
On 22 October 2001, Urban Bank, with respect to its pending Rule 45 Petition in this Court, moved for the
approval of its PhP40,000,000 supersedeas bond and requested that the Court stay the execution pending appeal.
Urban Bank vs. Pea G.R. No. 145817 15 of 40

Pea opposed the motion on the ground that it had already been rendered moot and academic by the sale of the
properties of the bank.
On 23 October 2002, or almost a year after some of the condominium units were sold in a public auction, EIB, as
the successor of Urban Bank, expressed to the sheriff of RTC-Bago City an intent to redeem the said condominium
units. Thus, EIB tendered three managers checks in the total amount of PhP22,108,800 to redeem the properties
that were previously under the name of Urban Bank. Although the trial court noted the banks Manifestation, the
sheriff returned the EIBs managers checks. Thus, on 29 October 2002, EIB, through a motion, was prompted to
turn over the checks to the trial court itself.
When Urban Bank supposedly failed to redeem the condominium units according to the sheriff, final Certificates of
Sale were issued in favor of Unimega on 04 November 2002. Upon the latters motion, RTC-Bago City, in its
Order dated 13 November 2002, ordered the Register of Deeds of Makati to transfer the Condominium Certificates
of Title to the name of Unimega. It has not been shown, though, whether this Order was followed.
This Court, acting on Urban Banks earlier motion to approve its supersedeas bond, granted the same in its
Resolution dated 19 November 2001. Pea moved for reconsideration of the approval, but his motion was
subsequently denied by the Court.
Proceedings in the Supreme Court (G. R. Nos. 145817, 145818 & 145822)
On 21 December 2000, Urban Bank, represented by its receiver, PDIC, filed a Rule 45 Petition with this Court
(docketed as G. R. No. 145817) to assail the CAs Amended Decision and Resolution granting execution pending
appeal. In response, Pea moved for the denial of the petition on the grounds of lack merit, violation of the rule
against forum shopping, and non-payment of docket fees, among others. In a separate Comment, Pea also argued
that the appellate court had committed no error when it considered the banks "imminent insolvency" as a good
reason for upholding the validity of the execution pending appeal.
On the other hand, the Borlongan Group filed a separate Rule 45 Petition questioning the same Decision and
Resolution, docketed as G. R. No. 145818. This Court initially denied their petition on the ground that it failed to
sufficiently show that the CA committed reversible order. The Borlongan Group twice moved for the
reconsideration of the denial of their petition; but the Court nonetheless denied both motions for lack of merit. This
denial of the petition in G. R. No. 145818 became final and executory, with the issuance of the Entry of Judgment.
Meanwhile, another Rule 45 Petition (G. R. No. 145822) was filed by the De Leon Group, assailing the same
Decisions of the appellate court. The Court also preliminarily denied this petition on the ground that the De Leon
Group failed to file the appeal within the reglementary period and to pay certain fees.
Despite the denial of the Rule 45 Petition in G. R. No. 145822 filed by the De Leon Group, the Court nonetheless
ordered that the case be consolidated with Urban Banks own Rule 45 Petition in G. R. No. 145817. The Court
subsequently gave due course to both of these petitions. In compliance with the Courts Order, Urban Bank and the
De Leon Group filed their respective Memoranda.
As detailed earlier, the Court granted and approved Urban Banks supersedeas bond and stayed the execution
pending appeal.
Considering the favorable stay of execution pending appeal, EIB, as the new owner and successor of Urban Bank,
immediately wrote to tell the corporate secretary of MSCI not to effect the cancellation or transfer of Urban Banks
Urban Bank vs. Pea G.R. No. 145817 16 of 40

three MSCI stock certificates previously sold in a public auction. In reply, MSCI explained that since there was no
injunction or stay order, it had no other option but to comply with the trial courts Order for the transfer.
Eventually, however, it could not effect the transfer of one of the shares to Pea because a club share had already
been previously registered in his name, and the clubs bylaws prohibited a natural person from owning more than
one share. Meanwhile, one of the winning bidders in the public auction sale of the MSCI shares wrote to the latter
to demand that the club share previously owned by Urban Bank be transferred to him.
On 04 February 2002, considering the conflicting claims of Urban Bank (through EIB) and the winning bidders of
the club shares, MSCI filed a Motion for Clarification of the Courts Resolution staying the execution pending
appeal.
In its Motion for Clarification dated 06 August 2002, Urban Bank likewise requested clarification of whether the
stay order suspended, as well, its right to redeem the properties sold at a public auction. The copy of Urban Banks
motion for clarification intended for Pea was mistakenly sent to the wrong counsel.
In its Resolution dated 13 November 2002, the Court explained that its earlier stay order prohibited the MSCI from
transferring the shares, and that the one-year period for redemption of the banks properties was likewise
suspended:
WHEREFORE, the Court hereby RESOLVES to clarify that as a consequence of its approval of the supersedeas
bond, the running of the one-year period for petitioner Urban Bank to redeem the properties sold at the public
auctions held on October 4, 11 and 25, 2001 as well as the consolidation of the titles in favor of the buyers, is
SUSPENDED OR STAYED. MSCI is also prohibited from transferring petitioner Urban Banks MSCI club shares
to the winning bidders in the execution sale held on October 11, 2001. (Emphasis supplied)
On 09 December 2002, Pea moved that the Courts Resolution be recalled, because he was not given an
opportunity to be heard on Urban Banks Motion for Clarification, which was sent to a different counsel.
Interposing its objection, the bank argued that the error in mistakenly sending the Motion for clarification to a
different counsel was by sheer inadvertence, but Pea was nonetheless aware of the motion, and that the
Courts clarification did not create or diminish his rights in any case.
The Motion for Clarification filed by Urban Bank, the Courts Resolution dated 13 November 2002 and Peas
Omnibus Motion praying for the recall of the said Resolution became the subject of an administrative case
(Administrative Case No. 6332), which was treated as a separate matter and later on de-consolidated with the
instant Petitions. The Court had even called for an executive session in which Pea, among others, appeared and
was questioned by the then members of the Courts First Division, namely retired Chief Justice Hilario Davide,
Justices Jose Vitug, Antonio Carpio and Adolfo Azcuna. Although the Petitions had earlier been assigned to Justice
Carpio, he has since taken no part in the proceedings of this case and this resulted in the re-raffling of the Petitions.
The transfer and unloading of the case by the subsequently assigned Justices as well as Peas numerous motions
for inhibition and/or re-raffle has likewise cause considerable delay in the disposition of the instant Petitions and
the Administrative Case.
Unimega, which was the winning bidder of some of the publicly executed condominium units of Urban Bank,
moved to intervene in the case and to have the Courts same Resolution suspending the one-year period of
redemption of the properties be reconsidered. Unimega claimed that ownership of the banks titles to the 10
condominium units had already been transferred to the former at the time the Court issued the Resolution; and,
Urban Bank vs. Pea G.R. No. 145817 17 of 40

thus, there was no more execution to be suspended or stayed. Only Urban Bank opposed the motion of intervenor
Unimega on the ground that the latter was not a buyer in good faith, and that the purchase price was grossly
disproportional to the fair market value of the condominium units.
The Court eventually granted the Motion to Intervene considering that the intervenors title to the condominium
units purchased at the public auction would be affected, favorably or otherwise, by the judgment of the Court in
this case. However, it held in abeyance the resolution of intervenors Motion for Reconsideration, which might
preempt the decision with respect to the propriety of execution pending appeal. Thereafter, the bank adopted its
earlier Opposition to the intervention as its answer to Unimegas petition-in-intervention. Also in answer thereto,
the De Leon Group adopted its earlier Manifestation and Comment.
Intervenor Unimega then requested that a writ of possession be issued in its favor covering the 10 condominium
units sold during the public auction. The Court required the parties to file their comments on the request. The Lim
and Borlongan Groups manifested separately that they would not be affected by a resolution of the request of
intervenor Unimega, since the latter was not among the contending parties to the incident. Pea similarly
interposed no objection to the issuance of the writ of possession. In contrast, Urban Bank opposed the application
of Unimega on the ground that the latter was not entitled to possession of the levied properties, because the rules of
extrajudicial foreclosure were not applicable to execution sales under Rule 39, and that intervenor was also not a
buyer in good faith. In a similar vein, the De Leon Group opposed the application for a writ of possession, and
further argued that the Court had already suspended the running of the one-year period of redemption in the
execution sale. Accordingly, intervenor Unimega countered that the right of redemption of the levied properties had
already expired without having been exercised by the judgment debtor.
In summary, the Court shall resolve the substantial issues in the following: (a) the Petition of Pea (G. R. No.
162562) assailing the CAs decision on the substantive merits of the case with respect to his claims of
compensation based on an agency agreement; and (b) the Petitions of Urban Bank (G. R. No. 145817) and the De
Leon Group (G R. No. 145822) questioning the propriety of the grant of execution pending appeal.
OUR RULING
I
Pea is entitled to payment for compensation for services rendered as agent of Urban Bank, but on the basis of the
principles of unjust enrichment and quantum meruit, and not on the purported oral contract.
The Court finds that Pea should be paid for services rendered under the agency relationship that existed between
him and Urban Bank based on the civil law principle against unjust enrichment, but the amount of payment he is
entitled to should be made, again, under the principle against unjust enrichment and on the basis of quantum
meruit.
In a contract of agency, agents bind themselves to render some service or to do something in representation or on
behalf of the principal, with the consent or authority of the latter. The basis of the civil law relationship of agency is
representation, the elements of which include the following: (a) the relationship is established by the parties
consent, express or implied; (b) the object is the execution of a juridical act in relation to a third person; (c) agents
act as representatives and not for themselves; and (d) agents act within the scope of their authority.
Whether or not an agency has been created is determined by the fact that one is representing and acting for another.
The law makes no presumption of agency; proving its existence, nature and extent is incumbent upon the person
Urban Bank vs. Pea G.R. No. 145817 18 of 40

alleging it.
With respect to the status of Atty. Peas relationship with Urban Bank, the trial and the appellate courts made
conflicting findings that shall be reconciled by the Court. On one end, the appellate court made a definitive ruling
that no agency relationship existed at all between Pea and the bank, despite the services performed by Pea with
respect to the Pasay property purchased by the bank. Although the Court of Appeals ruled against an award of
agents compensation, it still saw fit to award Pea with Ph3,000,000 for expenses incurred for his efforts in
clearing the Pasay property of tenants. On the other extreme, the trial court heavily relied on the sole telephone
conversation between Pea and Urban Banks President to establish that the principal-agent relationship created
between them included an agreement to pay Pea the huge amount of PhP24,000,000. In its defense, Urban Bank
insisted that Pea was never an agent of the bank, but an agent of ISCI, since the latter, as seller of the Pasay
property committed to transferring it free from tenants. Meanwhile, Pea argues on the basis of his successful and
peaceful ejectment of the sub-tenants, who previously occupied the Pasay property.
Based on the evidence on records and the proceedings below, the Court concludes that Urban Bank constituted
Atty. Pea as its agent to secure possession of the Pasay property. This conclusion, however, is not determinative of
the basis of the amount of payment that must be made to him by the bank. The context in which the agency was
created lays the basis for the amount of compensation Atty. Pea is entitled to.
The transactional history and context of the sale between ISCI and Urban Bank of the Pasay property, and Atty.
Peas participation in the transfer of possession thereof to Urban Bank provide crucial linkages that establish the
nature of the relationship between the lawyer and the landowner-bank.
The evidence reveals that at the time that the Contract to Sell was executed on 15 November 1994, and even when
the Deed of Absolute Sale was executed two weeks later on 29 November 1994, as far as Urban Bank was
concerned, Pea was nowhere in the picture. All discussions and correspondences were between the President and
Corporate Secretary of Urban Bank, on one hand, and the President of ISCI, on the other. The title to the Pasay
property was transferred to Urban Bank on 5 December 1994. Interestingly, Pea testifies that it was only on 19
December 1994 that he learned that the land had already been sold by ISCI to Urban Bank, notwithstanding the
fact that Pea was a director of ISCI. Pea was not asked to render any service for Urban Bank, neither did he
perform any service for Urban Bank at that point.
ISCI undertook in the Contract to Sell, to physically deliver the property to Urban Bank, within 60 days from 29
November 1994, under conditions of "full and actual possession and control ..., free from tenants, occupants,
squatters or other structures or from any liens, encumbrances, easements or any other obstruction or impediment to
the free use and occupancy by the buyer of the subject Property or its exercise of the rights to ownership over the
subject Property...." To guarantee this undertaking, ISCI agreed to the escrow provision where PhP25,000,000
(which is a little over 10% of the value of the Pasay property) would be withheld by Urban Bank from the total
contract price until there is full compliance with this undertaking.
Apparently to ensure that ISCI is able to deliver the property physically clean to Urban Bank, it was ISCIs
president, Enrique Montilla who directed on 26 November 1994 one of its directors, Pea, to immediately recover
and take possession of the property upon expiration of the contract of lease on 29 November 1994. Pea thus first
came into the picture as a director of ISCI who was constituted as its agent to recover the Pasay property against
the lessee as well as the sub-tenants who were occupying the property in violation of the lease agreement. He was
able to obtain possession of the property from the lessee on the following day, but the unauthorized sub-tenants
Urban Bank vs. Pea G.R. No. 145817 19 of 40

refused to vacate the property.


It was only on 7 December 1994, that Urban Bank was informed of the services that Pea was rendering for ISCI.
The faxed letter from ISCIs Marilyn Ong reads:
Atty. Magdaleno M. Pea, who has been assigned by Isabela Sugar Company, Inc., to take charge of
inspecting the tenants would like to request an authority similar to this from the Bank, as new owners. Can you
please issue something like this today as he needs this.
Two days later, on 9 December 1994, ISCI sent Urban Bank another letter that reads:
Dear Mr. Borlongan, I would like to request for an authorization from Urban Bank as per attached immediately
as the tenants are questioning the authority of the people there who are helping us to take over possession of
the property. (Emphasis supplied)
It is clear from the above that ISCI was asking Urban Bank for help to comply with ISCIs own contractual
obligation with the bank under the terms of the sale of the Pasay property. Urban Bank could have ignored the
request, since it was exclusively the obligation of ISCI, as the seller, to deliver a clean property to Urban Bank
without any help from the latter.
A full-bodied and confident interpretation of the contracts between ISCI and Urban Bank should have led the latter
to inform the unauthorized sub-tenants that under its obligation as seller to Urban Bank, it was under duty and had
continuing authority to recover clean possession of the property, despite the transfer of title. Yet, what unauthorized
sub-tenant, especially in the kind of operations being conducted within the Pasay property, would care to listen or
even understand such argument?
Urban Bank thus chose to cooperate with ISCI without realizing the kind of trouble that it would reap in the
process. In an apparent attempt to allow the efforts of ISCI to secure the property to succeed, it recognized Peas
role in helping ISCI, but stopped short of granting him authority to act on its behalf. In response to the two written
requests of ISCI, Urban Bank sent this letter to Pea on 15 December 1994:
This is to advise you that we have noted the engagement of your services by Isabela Sugar Company to recover
possession of the Roxas Boulevard property formerly covered by TCT No. 5382, effective November 29, 1994. It
is understood that your services have been contracted by and your principal remains to be the Isabela Sugar
Company, which as seller of the property and under the terms of our Contract to Sell dated November 29, 1994,
has committed to deliver the full and actual possession of the said property to the buyer, Urban Bank, within the
stipulated period. (Emphasis supplied)
Up to this point, it is unmistakable that Urban Bank was staying clear from making any contractual commitment to
Pea and conveyed its sense that whatever responsibilities arose in retaining Pea were to be shouldered by ISCI.
According to the RTC-Bago City, in the reversed Decision, Atty. Pea only knew of the sale between ISCI and
Urban Bank at the time the RTC-Pasay City recalled the TRO and issued a break-open order:
" when information reached the (Pasay City) judge that the Pasay property had already been transferred by ISCI
to Urban Bank, the trial court recalled the TRO and issued a break-open order for the property. According to Pea,
it was the first time that he was apprised of the sale of the land by ISCI and of the transfer of its title in favor of the
bank."
Urban Bank vs. Pea G.R. No. 145817 20 of 40

There is something contradictory between some of the trial courts factual findings and Peas claim that it was
only on 19 December 1994 that he first learned of the sale of the property to Urban Bank. It is difficult to believe
Pea on this point considering: (1) that he was a board director of ISCI and a sale of this significant and valuable
property of ISCI requires the approval of the board of directors of ISCI; and (2) that ISCI twice requested Urban
Bank for authority to be issued in his favor (07 and 9 December 1994), 12 and 10 days before 19 December 1994,
since it would be contrary to human experience for Pea not to have been informed by an officer of ISCI
beforehand that a request for authority for him was being sent to Urban Bank.
The sequence of fast-moving developments, edged with a sense of panic, with respect to the decision of the RTC-
Pasay City to recall the temporary restraining order and issue a break-open order on 19 December 1994 in the First
Injunction Complaint, is highly enlightening to this Court.
First, Pea allegedly called up the president of ISCI, Montilla, who, according to Pea, confirmed to him that the
Pasay property had indeed been sold to Urban Bank.
Second, Pea allegedly told Montilla that he (Pea) would be withdrawing his guards from the property because of
the break-open order from the RTC-Pasay City.
Third, Montilla requested Pea to suspend the withdrawal of the guards while ISCI gets in touch with Urban Bank.
Fourth, apparently in view of Montillas efforts, Bejasa, an officer of Urban Bank called Pea and according to the
latter, told him that Urban Bank would continue retaining his services and for him to please continue with his effort
to secure the property.
Fifth, this statement of Bejasa was not enough for Pea and he insisted that he be enabled to talk with no less than
the President of Urban Bank, Borlongan. At this point, Bejasa gave him the phone number of Borlongan.
Sixth, immediately after the conversation with Bejasa, Pea calls Borlongan and tells Borlongan that violence
might erupt in the property because the Pasay City policemen, who were sympathetic to the tenants, were
threatening to force their way through the property.
At this point, if indeed this conversation took place, which Borlongan contests, what would have been the response
of Borlongan? Any prudent president of a bank, which has just purchased a PhP240,000,000 property plagued by
unauthorized and unruly sub-tenants of the previous owner, would have sought to continue the possession of ISCI,
thru Pea, and he would have agreed to the reasonable requests of Pea. Borlongan could also have said that the
problem of having the sub-tenants ejected is completely ISCIs and ISCI should resolve the matter on its own that
without bothering the bank, with all its other problems. But the specter of violence, especially as night was
approaching in a newly-bought property of Urban Bank, was not something that any publicly-listed bank would
want publicized. To the extent that the violence could be prevented by the president of Urban Bank, it is expected
that he would opt to have it prevented.
But could such response embrace the following legal consequences as Pea claims to have arisen from the
telephone conversation with Borlongan: (1) A contract of agency was created between Pea and Urban Bank
whereby Borlongan agreed to retain the services of Pea directly; (2) This contract of agency was to be embodied
in a written letter of authority from Urban Bank; and (3) The agency fee of Pea was to be 10% of the market value
as "attorneys fees and compensation" and reimbursement of all expenses of Pea from the time he took over the
land until possession is turned over to Urban Bank.
Urban Bank vs. Pea G.R. No. 145817 21 of 40

This Court concludes that the legal consequences described in statements (1) and (2) above indeed took place and
that the facts support them. However, the evidence does not support Peas claim that Urban Bank agreed to
"attorneys fees and compensation" of 10% of the market value of the property.
Urban Banks letter dated 19 December 1994 confirmed in no uncertain terms Peas designation as its authorized
representative to secure and maintain possession of the Pasay property against the tenants. Under the terms of the
letter, petitioner-respondent bank confirmed his engagement (a) "to hold and maintain possession" of the Pasay
property; (b) "to protect the same from former tenants, occupants or any other person who are threatening to return
to the said property and/or interfere with your possession of the said property for and in our behalf"; and (c) to
represent the bank in any instituted court action intended to prevent any intruder from entering or staying in the
premises.
These three express directives of petitioner-respondent banks letter admits of no other construction than that a
specific and special authority was given to Pea to act on behalf of the bank with respect to the latters claims of
ownership over the property against the tenants. Having stipulated on the due execution and genuineness of the
letter during pretrial, the bank is bound by the terms thereof and is subject to the necessary consequences of Peas
reliance thereon. No amount of denial can overcome the presumption that we give this letter that it means what it
says.
In any case, the subsequent actions of Urban Bank resulted in the ratification of Peas authority as an agent acting
on its behalf with respect to the Pasay property. By ratification, even an unauthorized act of an agent becomes an
authorized act of the principal.
Both sides readily admit that it was Pea who was responsible for clearing the property of the tenants and other
occupants, and who turned over possession of the Pasay property to petitioner-respondent bank. When the latter
received full and actual possession of the property from him, it did not protest or refute his authority as an agent to
do so. Neither did Urban Bank contest Peas occupation of the premises, or his installation of security guards at
the site, starting from the expiry of the lease until the property was turned over to the bank, by which time it had
already been vested with ownership thereof. Furthermore, when Pea filed the Second Injunction Complaint in the
RTC-Makati City under the name of petitioner-respondent bank, the latter did not interpose any objection or move
to dismiss the complaint on the basis of his lack of authority to represent its interest as the owner of the property.
When he successfully negotiated with the tenants regarding their departure from its Pasay property, still no protest
was heard from it. After possession was turned over to the bank, the tenants accepted PhP1,500,000 from Pea, in
"full and final settlement" of their claims against Urban Bank, and not against ISCI.
In all these instances, petitioner-respondent bank did not repudiate the actions of Pea, even if it was fully aware of
his representations to third parties on its behalf as owner of the Pasay property. Its tacit acquiescence to his
dealings with respect to the Pasay property and the tenants spoke of its intent to ratify his actions, as if these were
its own. Even assuming arguendo that it issued no written authority, and that the oral contract was not substantially
established, the bank duly ratified his acts as its agent by its acquiescence and acceptance of the benefits, namely,
the peaceful turnover of possession of the property free from sub-tenants.
Even if, however, Pea was constituted as the agent of Urban Bank, it does not necessarily preclude that a third
party would be liable for the payment of the agency fee of Pea. Nor does it preclude the legal fact that Pea while
an agent of Urban Bank, was also an agent of ISCI, and that his agency from the latter never terminated. This is
because the authority given to Pea by both ISCI and Urban Bank was common to secure the clean possession of
Urban Bank vs. Pea G.R. No. 145817 22 of 40

the property so that it may be turned over to Urban Bank. This is an ordinary legal phenomenon that an agent
would be an agent for the purpose of pursuing a shared goal so that the common objective of a transferor and a new
transferee would be met.
Indeed, the Civil Code expressly acknowledged instances when two or more principals have granted a power of
attorney to an agent for a common transaction. The agency relationship between an agent and two principals may
even be considered extinguished if the object or the purpose of the agency is accomplished. In this case, Peas
services as an agent of both ISCI and Urban Bank were engaged for one shared purpose or transaction, which was
to deliver the property free from unauthorized sub-tenants to the new owner a task that Pea was able to achieve
and is entitled to receive payment for.
That the agency between ISCI and Pea continued, that ISCI is to shoulder the agency fee and reimbursement for
costs of Pea, and that Urban Bank never agreed to pay him a 10% agency fee is established and supported by the
following:
First, the initial agency relationship between ISCI and Pea persisted. No proof was ever offered that the letter of
26 November 1994 of Mr. Montilla of ISCI to Pea, for the latter "to immediately recover and take possession of
the property upon expiration of the contract of lease on 29 November 1994" was terminated. It is axiomatic that the
appointment of a new agent for the same business or transaction revokes the previous agency from the day on
which notice thereof was given to the former agent. If it is true that the agency relationship was to be borne by
Urban Bank alone, Pea should have demonstrated that his previous agency relationship with ISCI is incompatible
with his new relationship with Urban Bank, and was thus terminated.
Second, instead, what is on the record is that ISCI confirmed the continuation of this agency between Pea and
itself and committed to pay for the services of Pea, in its letter to Urban Bank dated 19 December 1994 which
reads:
In line with our warranties as the Seller of the said property and our undertaking to deliver to you the full and
actual possession and control of said property, free from tenants, occupants or squatters and from any obstruction
or impediment to the free use and occupancy of the property by Urban Bank, we have engaged the services of Atty.
Magdaleno M. Pea to hold and maintain possession of the property and to prevent the former tenants or occupants
from entering or returning to the premises. In view of the transfer of the ownership of the property to Urban Bank,
it may be necessary for Urban Bank to appoint Atty. Pea likewise as its authorized representative for purposes of
holding/maintaining continued possession of the said property and to represent Urban Bank in any court action that
may be instituted for the abovementioned purposes.
It is understood that any attorneys fees, cost of litigation and any other charges or expenses that may be incurred
relative to the exercise by Atty. Pea of his abovementioned duties shall be for the account of Isabela Sugar
Company and any loss or damage that may be incurred to third parties shall be answerable by Isabela Sugar
Company. (Emphasis supplied)
Third, Pea has never shown any written confirmation of his 10% agency fee, whether in a note, letter,
memorandum or board resolution of Urban Bank. An agency fee amounting to PhP24,000,000 is not a trifling
amount, and corporations do not grant their presidents unilateral authority to bind the corporation to such an
amount, especially not a banking corporation which is closely supervised by the BSP for being a business seriously
imbued with public interest. There is nothing on record except the self-serving testimony of Pea that Borlongan
Urban Bank vs. Pea G.R. No. 145817 23 of 40

agreed to pay him this amount in the controverted telephone conversation.


Fourth, while ordinarily, uncontradicted testimony will be accorded its full weight, we cannot grant full probative
value to the testimony of Pea for the following reasons: (a) Pea is not a credible witness for testifying that he
only learned of the sale of the property of 19 December 1994 when the acts of ISCI, of Urban Bank and his own up
to that point all indicated that he must have known about the sale to Urban Bank; and (b) it is incredible that Urban
Bank will agree to add another PhP24,000,000 to the cost of the property by agreeing to the agency fee demanded
by Pea. No prudent and reasonable person would agree to expose his corporation to a new liability of
PhP24,000,000 even if, in this case, a refusal would lead to the Pasay City policemen and unauthorized sub-tenants
entering the guarded property and would possibly erupt in violence.
Peas account of an oral agreement with Urban Bank for the payment of PhP24,000,000 is just too much for any
court to believe. Whatever may be the agreement between Pea and ISCI for compensation is not before this Court.
This is not to say, however, that Urban Bank has no liability to Pea. It has. Payment to him is required because the
Civil Code demands that no one should be unjustly enriched at the expense of another. This payment is to be
measured by the standards of quantum meruit.
Amount of Compensation
Agency is presumed to be for compensation. But because in this case we find no evidence that Urban Bank agreed
to pay Pea a specific amount or percentage of amount for his services, we turn to the principle against unjust
enrichment and on the basis of quantum meruit.
Since there was no written agreement with respect to the compensation due and owed to Atty. Pea under the letter
dated 19 December 1994, the Court will resort to determining the amount based on the well-established rules on
quantum meruit.
Agency is presumed to be for compensation. Unless the contrary intent is shown, a person who acts as an agent
does so with the expectation of payment according to the agreement and to the services rendered or results effected.
We find that the agency of Pea comprised of services ordinarily performed by a lawyer who is tasked with the job
of ensuring clean possession by the owner of a property. We thus measure what he is entitled to for the legal
services rendered.
A stipulation on a lawyers compensation in a written contract for professional services ordinarily controls the
amount of fees that the contracting lawyer may be allowed to collect, unless the court finds the amount to be
unconscionable. In the absence of a written contract for professional services, the attorneys fees are fixed on the
basis of quantum meruit, i.e., the reasonable worth of the attorneys services. When an agent performs services for
a principal at the latters request, the law will normally imply a promise on the part of the principal to pay for the
reasonable worth of those services. The intent of a principal to compensate the agent for services performed on
behalf of the former will be inferred from the principals request for the agents.
In this instance, no extra-ordinary skills employing advanced legal training nor sophisticated legal maneuvering
were required to be employed in ejecting 23 sub-tenants who have no lease contract with the property owner, and
whose only authority to enter the premises was unlawfully given by a former tenant whose own tenancy has clearly
expired. The 23 sub-tenants operated beer houses and nightclubs, ordinary retail establishments for which no
sophisticated structure prevented easy entry. After Pea succeeded in locking the gate of the compound, the sub-
tenants would open the padlock and resume their businesses at night. Indeed, it appears that only security guards,
Urban Bank vs. Pea G.R. No. 145817 24 of 40

chains and padlocks were needed to keep them out. It was only the alleged connivance of Pasay City policemen
that Peas ability to retain the possession was rendered insecure. And how much did it take Pea to enter into a
settlement agreement with them and make all these problems go away? By Peas own account, PhP1,500,000
only. That means that each tenant received an average of PhP65,217.40 only. Surely, the legal services of Pea
cannot be much more than what the sub-tenants were willing to settle for in the first place. We therefore award him
the equivalent amount of PhP1,500,000 for the legal and other related services he rendered to eject the illegally
staying tenants of Urban Banks property.
The Court of Appeals correctly reversed the trial court and found it to have acted with grave abuse of discretion in
granting astounding monetary awards amounting to a total of PhP28,500,000 without any basis. For the lower court
to have latched on to the self-serving claims of a telephone agreement as sufficient support for extending a multi-
million peso award is highly irregular. Absent any clear basis for the amount of the lawyers compensation, the trial
court should have instinctively resorted to quantum meruit, instead of insisting on a figure with circumstantial and
spurious justification.
We cannot also agree with the Decision penned by Judge Edgardo L. Catilo characterizing Penas 10% fee as
believable because it is nearly congruent to the PhP25 Million retention money held in escrow for ISCI until a
clean physical and legal turn-over of the property is effected:
We now come to the reasonableness of the compensation prayed for by the plaintiff which is 10% of the current
market value which defendants claim to be preposterous and glaringly excessive. Plaintiff [Pea] testified that
defendant Borlongan agreed to such an amount and this has not been denied by Ted Borlongan. The term "current
market value of the property" is hereby interpreted by the court to mean the current market value of the property at
the time the contract was entered into. To interpret it in accordance with the submission of the plaintiff that it is the
current market value of the property at the time payment is made would be preposterous. The only evidence on
record where the court can determine the market value of the property at the time the contract of agency was
entered into between plaintiff and defendant is the consideration stated in the sales agreement between Isabela
Sugar Company, Inc. and Urban bank which is P241,612,000.00. Ten percent of this amount is a reasonable
compensation of the services rendered by the plaintiff considering the "no cure, no pay" arrangement between the
parties and the risks which plaintiff had to undertake.
In the first place, the Decision of Judge Catilo makes Peas demand of an agency fee of PhP24 Million, an
additional burden on Urban Bank. The Decision does not make the retention money responsible for the same, or
acquit Urban Bank of any liability to ISCI if it pays the PhP24 Million directly to Pena instead of ISCI. In the
second place, the amount of money that is retained by transferees of property transactions while the transferor is
undertaking acts to ensure a clean and peaceful transfer to the transferee does not normally approximate a one-to-
one relationship to the services of ejecting unwanted occupants. They may be inclusive of other costs, and not only
legal costs, with enough allowances for contingencies, and may take into consideration other liabilities as well. The
amount can even be entirely arbitrary, and may have been caused by the practice followed by Urban Bank as
advised by its officers and lawyers or by industry practice in cases where an expensive property has some tenancy
problems. In other words, Judge Catilos statement is a non sequitur, is contrary to normal human experience, and
sounds like an argument being made to fit Peas demand for a shocking pay-out.
In any case, 10% of the purchase price of the Pasay property a staggering PhP24,161,200 is an unconscionable
amount, which we find reason to reduce. Neither will the Court accede to the settlement offer of Pea to Urban
Urban Bank vs. Pea G.R. No. 145817 25 of 40

Bank of at least PhP38,000,000 for alleged legal expenses incurred during the course of the proceedings, an
amount that he has not substantiated at any time.
Lawyering is not a business; it is a profession in which duty to public service, not money, is the primary
consideration. The principle of quantum meruit applies if lawyers are employed without a price agreed upon for
their services, in which case they would be entitled to receive what they merit for their services, or as much as they
have earned. In fixing a reasonable compensation for the services rendered by a lawyer on the basis of quantum
meruit, one may consider factors such as the time spent and extent of services rendered; novelty and difficulty of
the questions involved; importance of the subject matter; skill demanded; probability of losing other employment
as a result of acceptance of the proffered case; customary charges for similar services; amount involved in the
controversy and the resulting benefits for the client; certainty of compensation; character of employment; and
professional standing of the lawyer.
Hence, the Court affirms the appellate courts award of PhP3,000,000 to Pea, for expenses incurred corresponding
to the performance of his services. An additional award of PhP1,500,000 is granted to him for the services he
performed as a lawyer in securing the rights of Urban Bank as owner of the Pasay property.
II
The corporate officers and directors of Urban Bank are not solidarily or personally liable with their properties for
the corporate liability of Urban Bank to Atty. Pea.
The obligation to pay Peas compensation, however, falls solely on Urban Bank. Absent any proof that individual
petitioners as bank officers acted in bad faith or with gross negligence or assented to a patently unlawful act, they
cannot be held solidarily liable together with the corporation for services performed by the latters agent to secure
possession of the Pasay property. Thus, the trial court had indeed committed grave abuse of discretion when it
issued a ruling against the eight individual defendant bank directors and officers and its Decision should be
absolutely reversed and set aside.
A corporation, as a juridical entity, may act only through its directors, officers and employees. Obligations incurred
as a result of the acts of the directors and officers as corporate agents are not their personal liabilities but those of
the corporation they represent. To hold a director or an officer personally liable for corporate obligations, two
requisites must concur: (1) the complainant must allege in the complaint that the director or officer assented to
patently unlawful acts of the corporation, or that the officer was guilty of gross negligence or bad faith; and (2) the
complainant must clearly and convincingly prove such unlawful acts, negligence or bad faith. "To hold a director, a
trustee or an officer personally liable for the debts of the corporation and, thus, pierce the veil of corporate fiction,
bad faith or gross negligence by the director, trustee or officer in directing the corporate affairs must be established
clearly and convincingly."
Pea failed to allege and convincingly show that individual defendant bank directors and officers assented to
patently unlawful acts of the bank, or that they were guilty of gross negligence or bad faith. Contrary to his claim,
the Complaint in the lower court never alleged that individual defendants acquiesced to an unlawful act or were
grossly negligent or acted in bad faith. Neither is there any specific allegation of gross negligence or action in bad
faith that is attributable to the individual defendants in performance of their official duties.
In any event, Pea did not adduce any proof that the eight individual defendants performed unlawful acts or were
grossly negligent or in bad faith. Aside from the general allegation that they were corporate officers or members of
Urban Bank vs. Pea G.R. No. 145817 26 of 40

the board of directors of Urban Bank, no specific acts were alleged and proved to warrant a finding of solidary
liability. At most, petitioners Borlongan, Bejasa and Manuel were identified as those who had processed the agency
agreement with Pea through their telephone conversations with him and/or written authorization letter.
Aside from Borlongan, Bejasa and Manuel, Atty. Pea in the complaint pointed to no specific act or circumstance
to justify the inclusion of Delfin C. Gonzalez, Jr., Benjamin L. de Leon, P. Siervo H. Dizon, Eric L. Lee, and Ben
T. Lim, Jr., except for the fact that they were members of the Board of Directors of Urban Bank at that time. That
the five other members of the Board of Directors were excluded from Peas complaint highlights the peculiarity of
their inclusion. What is more, the complaint mistakenly included Ben Y. Lim, Jr., who had not even been a member
of the Board of Directors of Urban Bank. In any case, his father and namesake, Ben T. Lim, Sr., who had been a
director of the bank at that time, had already passed away in 1997.
In ruling for the solidary liability of the other bank directors, the decision of the trial court hinged solely on the
purported admission of Arturo Manuel, Jr., that the transactions with Atty. Pea were approved by the Board of
Directors:
In this case, plaintiff testified as to the personal participation of defendants Ted Borlongan and Corazon Bejasa in
the subject transaction. On the other hand, with respect to the other defendants, it was the defendants themselves,
through witness Arturo Manuel, Jr., who admitted that all the transactions involved in this case were approved by
the board of directors. Thus, the court has sufficient basis to hold the directors jointly and severally liable with
defendant Urban Bank, Inc. (Emphasis supplied)
The Decision of the RTC-Bago City must be utterly rejected on this point because its conclusion of any cause of
action, much less actual legal liability on the part of Urban Banks corporate officers and directors are shorn of any
factual finding. That they assented to the transactions of the bank with respect to Atty. Peas services without any
showing that these corporate actions were patently unlawful or that the officers were guilty of gross negligence or
bad faith is insufficient to hold them solidarily liable with Urban Bank. It seems absurd that the trial court will hold
the impleaded selected members of the Board of Directors only, but not the others who also purportedly approved
the transactions. Neither is the reason behind the finding of "solidariness" with Urban Bank in such liability
explained at all. It is void for completely being devoid of facts and the law on which the finding of liability is
based.
The Court of Appeals correctly rejected the claim of personal liability against the individual petitioners when it
held as follows:
The plaintiff-appellees complaint before the court a quo does not point to any particular act of either one or all of
the defendants-appellants that will subject them to personal liability. His complaint merely asserts that defendant
Borlongan and Atty. Bejasa acted for and in behalf of Urban Bank in securing his services in protecting the banks
newly acquired property. Hence, We cannot allow the same.
Pea had argued that individual defendant bank directors and officers should be held personally and solidarily
liable with petitioner-respondent bank, since they failed to argue for limited corporate liability. The trial court
subscribed to his reasoning and held that the failure to resort to the said defense constituted a waiver on the part of
individual defendants. The Court is not persuaded.
As the complainant on the trial court level, Pea carried the burden of proving that the eight individual defendants
performed specific acts that would make them personally liable for the obligations of the corporation. This he
Urban Bank vs. Pea G.R. No. 145817 27 of 40

failed to do. He cannot capitalize on their alleged failure to offer a defense, when he had not discharged his
responsibility of establishing their personal liabilities in the first place. This Court cannot sustain the individual
liabilities of the bank officers when Pea, at the onset, has not persuasively demonstrated their assent to patently
unlawful acts of the bank, or that they were guilty of gross negligence or bad faith, regardless of the weaknesses of
the defenses raised. This is too basic a requirement that this Court must demand sufficient proof before we can
disregard the separate legal personality of the corporation from its offices.
Hence, only Urban Bank, not individual defendants, is liable to pay Peas compensation for services he rendered
in securing possession of the Pasay property. Its liability in this case is, however, without prejudice to its possible
claim against ISCI for reimbursement under their separate agreements.
III
Considering the absolute nullification of the trial courts Decision, the proceedings arising from the execution
pending appeal based on the said Decision is likewise completely vacated.
Since the trial courts main Decision awarding PhP28,500,000 in favor of Pea has been nullified above, the
execution pending appeal attendant thereto, as a result, no longer has any leg to stand on and is thus completely
vacated.
To recall, prior to the filing of Urban Bank of its notice of appeal in the main case, Pea moved on 07 June 1999
for execution pending appeal of the Decision, which had awarded him a total of PhP28,500,000 in compensation
and damages. In supporting his prayer for discretionary execution, Pea cited no other reason than the pending
separate civil action for collection filed against him by a creditor, who was demanding payment of a PhP3,000,000
loan. According to him, he had used the proceeds of the loan for securing the banks Pasay property. In opposition
to the motion, Urban Bank countered that the collection case was not a sufficient reason for allowing execution
pending appeal.
Favorably acting on Peas motion, the RTC-Bago City, through Judge Henry J. Trocino, issued a Special Order
authorizing execution pending appeal on the basis of Peas indebtedness to his creditor-friend. In accordance with
this Special Order, Atty. Josephine Mutia-Hagad, the clerk of court and ex officio sheriff, expeditiously issued a
Writ of Execution on the same day. The trial courts Special Order and Writ of Execution were the subjects of a
Rule 65 Petition filed by Urban Bank with the CA.
Both the Special Order and Writ of Execution are nullified for two reasons:
(1) Since the Decision of the RTC-Bago City is completely vacated, all its issuances pursuant to the
Decision, including the Special Order and the Writ of Execution are likewise vacated; and
(2) The Special Order authorizing execution pending appeal based on the collection suit filed against Atty.
Pea had no basis under the Rules of Court, and the same infirmity thus afflicts the Writ of Execution
issued pursuant thereto.
Since the Decision of the RTC-Bago City is vacated, all orders and writs pursuant thereto are likewise vacated.
Considering that the Special Order and Writ of Execution was a result of the trial courts earlier award of
PhP28,500,000, the nullification or complete reversal of the said award necessarily translates to the vacation as
well of the processes arising therefrom, including all the proceedings for the execution pending appeal.
Urban Bank vs. Pea G.R. No. 145817 28 of 40

Considering the unconscionable award given by the trial court and the unjustified imposition of solidary liability
against the eight bank officers, the Court is vacating the Decision of the RTC-Bago City Decision. The trial court
erroneously made solidarily liable Urban Banks directors and officers without even any allegations, much less
proof, of any acts of bad faith, negligence or malice in the performance of their duties. In addition, the trial court
mistakenly anchored its astounding award of damages amounting PhP28,500,000 on the basis of the mere account
of Atty. Pea of a telephone conversation, without even considering the surrounding circumstances and the sheer
disproportion to the legal services rendered to the bank.
A void judgment never acquires finality. In contemplation of law, that void decision is deemed non-existent. Quod
nullum est, nullum producit effectum. Hence, the validity of the execution pending appeal will ultimately hinge on
the courts findings with respect to the decision in which the execution is based.
Although discretionary execution can proceed independently while the appeal on the merits is pending, the
outcome of the main case will greatly impact the execution pending appeal, especially in instances where as in this
case, there is a complete reversal of the trial courts decision. Thus, if the decision on the merits is completely
nullified, then the concomitant execution pending appeal is likewise without any effect. In fact, the Rules of Court
expressly provide for the possibility of reversal, complete or partial, of a final judgment which has been executed
on appeal. Precisely, the execution pending appeal does not bar the continuance of the appeal on the merits, for the
Rules of Court explicitly provide for restitution according to equity and justice in case the executed judgment is
reversed on appeal.
Considering that the Decision of the RTC-Bago City has been completely vacated and declared null and void, it
produces no effect whatsoever. Thus, the Special Order and its concomitant Writ of Execution pending appeal is
likewise annulled and is also without effect. Consequently, all levies, garnishment and sales executed pending
appeal are declared null and void, with the concomitant duty of restitution under the Rules of Court, as will be
discussed later on.
In any case, the trial courts grant of execution pending appeal lacks sufficient basis under the law and
jurisprudence.
We rule that the pendency of a collection suit by a third party creditor which credit was obtained by the winning
judgment creditor in another case, is not a sufficiently good reason to allow execution pending appeal as the Rules
of Court provide. Execution pending appeal is an extraordinary remedy allowed only when there are reasons to
believe that the judgment debtor will not be able to satisfy the judgment debt if the appeals process will still have
to be awaited. It requires proof of circumstances such as insolvency or attempts to escape, abscond or evade a just
debt.
In Florendo v. Paramount Insurance, Corp., the Court explained that the execution pending appeal is an exception
to the general rule that execution issues as a matter of right, when a judgment has become final and executory:
As such exception, the courts discretion in allowing it must be strictly construed and firmly grounded on the
existence of good reasons. "Good reasons," it has been held, consist of compelling circumstances that justify
immediate execution lest the judgment becomes illusory. The circumstances must be superior, outweighing the
injury or damages that might result should the losing party secure a reversal of the judgment. Lesser reasons would
make of execution pending appeal, instead of an instrument of solicitude and justice, a tool of oppression and
inequity. (Emphasis supplied)
Urban Bank vs. Pea G.R. No. 145817 29 of 40

Indeed, the presence or the absence of good reasons remains the yardstick in allowing the remedy of execution
pending appeal, which should consist of exceptional circumstances of such urgency as to outweigh the injury or
damage that the losing party may suffer, should the appealed judgment be reversed later. Thus, the Court held that
even the financial distress of the prevailing company is not sufficient reason to call for execution pending appeal:
In addressing this issue, the Court must stress that the execution of a judgment before its finality must be founded
upon good reasons. The yardstick remains the presence or the absence of good reasons consisting of exceptional
circumstances of such urgency as to outweigh the injury or damage that the losing party may suffer, should the
appealed judgment be reversed later. Good reason imports a superior circumstance that will outweigh injury or
damage to the adverse party. In the case at bar, petitioner failed to show "paramount and compelling reasons of
urgency and justice." Petitioner cites as good reason merely the fact that "it is a small-time building contractor that
could ill-afford the protracted delay in the reimbursement of the advances it made for the aforesaid increased costs
of . . . construction of the [respondent's] buildings."
Petitioner's allegedly precarious financial condition, however, is not by itself a jurisprudentially compelling
circumstance warranting immediate execution. The financial distress of a juridical entity is not comparable to a
case involving a natural person such as a very old and sickly one without any means of livelihood, an heir
seeking an order for support and monthly allowance for subsistence, or one who dies.
Indeed, the alleged financial distress of a corporation does not outweigh the long standing general policy of
enforcing only final and executory judgments. Certainly, a juridical entity like petitioner corporation has, other than
extraordinary execution, alternative remedies like loans, advances, internal cash generation and the like to address
its precarious financial condition. (Emphasis supplied)
In Philippine Bank of Communications v. Court of Appeals, the Court denied execution pending appeal to a
juridical entity which allegedly was in financial distress and was facing civil and criminal suits with respect to the
collection of a sum of money. It ruled that the financial distress of the prevailing party in a final judgment which
was still pending appeal may not be likened to the situation of a natural person who is ill, of advanced age or dying
as to justify execution pending appeal:
It is significant to stress that private respondent Falcon is a juridical entity and not a natural person. Even assuming
that it was indeed in financial distress and on the verge of facing civil or even criminal suits, the immediate
execution of a judgment in its favor pending appeal cannot be justified as Falcons situation may not be likened to a
case of a natural person who may be ill or may be of advanced age. Even the danger of extinction of the
corporation will not per se justify a discretionary execution unless there are showings of other good reasons, such
as for instance, impending insolvency of the adverse party or the appeal being patently dilatory. But even as to the
latter reason, it was noted in Aquino vs. Santiago (161 SCRA 570 [1988]), that it is not for the trial judge to
determine the merit of a decision he rendered as this is the role of the appellate court. Hence, it is not within
competence of the trial court, in resolving a motion for execution pending appeal, to rule that the appeal is patently
dilatory and rely on the same as its basis for finding good reason to grant the motion. Only an appellate court can
appreciate the dilatory intent of an appeal as an additional good reason in upholding an order for execution pending
appeal which may have been issued by the trial court for other good reasons, or in cases where the motion for
execution pending appeal is filed with the appellate court in accordance with Section 2, paragraph (a), Rule 39 of
the 1997 Rules of Court.
What is worse, only one case was actually filed against Falcon and this is the complaint for collection filed by
Urban Bank vs. Pea G.R. No. 145817 30 of 40

Solidbank. The other cases are "impending", so it is said. Other than said Solidbank case, Falcons survival as a
body corporate cannot be threatened by anticipated litigation. This notwithstanding, and even assuming that there
was a serious threat to Falcons continued corporate existence, we hold that it is not tantamount nor even similar to
an impending death of a natural person. The material existence of a juridical person is not on the same plane as that
of human life. The survival of a juridical personality is clearly outweighed by the long standing general policy of
enforcing only final and executory judgments. (Emphasis supplied)
In this case, the trial court supported its discretionary grant of execution based on the alleged collection suit filed
against Pea by his creditor friend for PhP3,000,000:
It has been established that the plaintiff secured the loan for the purpose of using the money to comply with the
mandate of defendant bank to hold and maintain possession of the parcel of land in Pasay City and to prevent
intruders and former tenants from occupying the said property. The purpose of the loan was very specific and the
same was made known to defendant bank through defendant Teodoro Borlongan. The loan was not secured for
some other purpose. Truth to tell, the plaintiff accomplished his mission in clearing the property of tenants,
intruders and squatters, long before the deadline given him by the defendant bank. The plaintiff was assured by no
less than the President of defendant bank of the availability of funds for his compensation and reimbursement of
his expenses. Had he been paid by defendant bank soon after he had fulfilled his obligation, he could have settled
his loan obligation with his creditor.
Defendants were benefitted by the services rendered by the plaintiff. While plaintiff has complied with the
undertaking, the defendants, however, failed to perform their obligation to the plaintiff.
The plaintiff stands to suffer greatly if the collection case against him is not addressed. Firstly, as shown in Exhibit
"C", plaintiffs total obligation with Roberto Ignacio as of May 1999 is PhP24,192,000.00. This amount, if left
unpaid, will continue to increase due to interest charges being imposed by the creditor to the prejudice of plaintiff.
Secondly, a preliminary attachment has already been issued and this would restrict the plaintiff from freely
exercising his rights over his property during the pendency of the case.
In their opposition, defendants claim that plaintiffs indebtedness is a ruse, however, defendants failed to adduce
evidence to support its claim.
The court finds that the pendency of the case for collection of money against plaintiff is a good reason for
immediate execution.
The mere fact that Atty. Pea was already subjected to a collection suit for payment of the loan proceeds he used to
perform his services for Urban Bank is not an acceptable reason to order the execution pending appeal against the
bank. Financial distress arising from a lone collection suit and not due to the advanced age of the party is not an
urgent or compelling reason that would justify the immediate levy on the properties of Urban Bank pending appeal.
That Pea would made liable in the collection suit filed by his creditor-friend would not reasonably result in
rendering illusory the final judgment in the instant action for agents compensation.
Peas purported difficulty in paying the loan proceeds used to perform his services does not outweigh the injury or
damages that might result should Urban Bank obtain a reversal of the judgment, as it did in this case. Urban Bank
even asserts that the collection suit filed against Pea was a mere ruse to provide justification for the execution
pending appeal, no matter how flimsy. As quoted above, the trial court noted Atty. Peas total obligation to his
creditor-friend as of May 1999 was already the incredible amount of PhP24,192,000.00, even when the Complaint
Urban Bank vs. Pea G.R. No. 145817 31 of 40

dated 03 April 1999 itself, which spawned the collection suit included only a prayer for payment of PhP3,500,000
with attorneys fees of PhP100,000. It seems absurd that Atty. Pea would agree to obtaining a loan from his own
friend, when the Promissory Notes provided for a penalty of 5% interest per month or 60% per annum for delay in
the payment. It sounds more like a creative justification of the immediate execution of the PhP28.5 Million
judgment notwithstanding the appeal.
In fact, the Court of Appeals noted Atty. Peas admission of sufficient properties to answer for any liability arising
from the collection suit arising from his creditor-friend. In initially denying the execution pending appeal, the
appellate court held that:
On the other hand, private respondents claim that the only way he could pay his indebtedness to Roberto Ignacio is
through the money that he expects to receive from petitioners in payment of his services is belied by his testimony
at the hearing conducted by the trial court on the motion for execution pending appeal wherein petitioners were
able to secure an admission from him that he has some assets which could be attached by Roberto Ignacio and that
he would probably have other assets left even after the attachment.
Hence, to rule that a pending collection suit against Atty. Pea, which has not been shown to result in his
insolvency, would be to encourage judgment creditors to indirectly and indiscriminately instigate collection suits or
cite pending actions, related or not, as a "good reason" to routinely avail of the remedy of discretionary execution.
As an exception to the general rule on execution after final and executory judgment, the reasons offered by Atty.
Pea to justify execution pending appeal must be strictly construed.
Neither will the Court accept the trial courts unfounded assumption that Urban Banks appeal was merely dilatory,
as in fact, the PhP28,500,000 award given by the trial court was overturned by the appellate court and eventually
by this Court.
Moreover, at the time the Special Order of Judge Henry Trocio of the RTC-Bago City came out in 1999, Urban
Bank had assets worth more than PhP11 Billion and had a net worth of more than PhP2 Billion. There was no
reason then to believe that Urban Bank could not satisfy a judgment of PhP28,500,000, a sum that was only 1% of
its net worth, and 1/5 of 1% of its total assets of PhP11,933,383,630. Urban Bank was even given a Solvency,
Liquidity and Management Rating of 82.89 over 100 by no less than the BSP and reportedly had liquid assets
amounting to PhP2,036,878. In fact, no allegation of impending insolvency or attempt to abscond was ever raised
by Atty. Pea and yet, the trial court granted execution pending appeal.
Since the original order granting execution pending appeal was completely void for containing no justifiable
reason, it follows that any affirmance of the same by the Court of Appeals is likewise void.
The Decision of the Court of Appeals in the case docketed as CA-G.R. SP No. 55667, finding a new reason for
granting execution pending appeal, i.e., the receivership of Urban Bank, is likewise erroneous, notwithstanding this
Courts ruling in Lee v. Trocino. In accordance with the subsequent Resolution of the Court in abovementioned
case of Lee v. Trocino, we directly resolve the issue of the insufficiency of the reasons that led to the grant of
execution pending appeal.
In cases where the two or more defendants are made subsidiarily or solidarily liable by the final judgment of the
trial court, discretionary execution can be allowed if all the defendants have been found to be insolvent.
Considering that only Urban Bank, and not the other eight individual defendants, was later on considered by the
Court of Appeals to have been "in danger of insolvency," is not sufficient reason to allow execution pending
Urban Bank vs. Pea G.R. No. 145817 32 of 40

appeal, since the liability for the award to Pea was made (albeit, mistakenly) solidarily liable together with the
bank officers.
In Flexo Manufacturing Corp. v. Columbus Food, Inc., and Pacific Meat Company, Inc., both Columbus Food,
Inc., (Columbus Food) and Pacific Meat Company, Inc., (Pacific Meat) were found by the trial court therein to be
solidarily liable to Flexo Manufacturing, Inc., (Flexo Manufacturing) for the principal obligation of
PhP2,957,270.00. The lower court also granted execution pending appeal on the basis of the insolvency of
Columbus Food, even if Pacific Meat was not found to be insolvent. Affirming the reversal ordered by the Court of
Appeals, this Court ruled that since there was another party who was solidarily liable to pay for the judgment debt,
aside from the insolvent Columbus Food, there was no good reason to allow the execution pending appeal:
Regarding the state of insolvency of Columbus, the case of Philippine National Bank v. Puno, held:
"While this Court in several cases has held that insolvency of the judgment debtor or imminent danger thereof is a
good reason for discretionary execution, otherwise to await a final and executory judgment may not only diminish
but may nullify all chances for recovery on execution from said judgment debtor, We are constrained to rule
otherwise in this particular case. In the aforecited cases, there was either only one defeated party or judgment
debtor who was, however, insolvent or there were several such parties but all were insolvent, hence the aforesaid
rationale for discretionary execution was present. In the case at bar, it is undisputed that, assuming MMIC is
insolvent, its co-defendant PNB is not. It cannot, therefore, be plausibly assumed that the judgment might become
illusory; if MMIC cannot satisfy the judgment, PNB will answer for it. It will be observed that, under the
dispositive portion of the judgment hereinbefore quoted, the liability of PNB is either subsidiary or solidary.
Thus, when there are two or more defendants and one is not insolvent, the insolvency of a co-defendant is not a
good reason to justify execution pending appeal if their liability under the judgment is either subsidiary or solidary.
In this case, Pacific was adjudged to be solidarily liable with Columbus. Therefore, the latter is not the only party
that may be answerable to Flexo. Its insolvency does not amount to a good reason to grant execution pending
appeal. (Emphasis supplied)
Similarly, the trial court in this case found Urban Bank and all eight individual bank officers solidarily liable to
Atty. Pea for the payment of the PhP28,500,000 award. Hence, had the judgment been upheld on appeal, Atty.
Pea could have demanded payment from any of the nine defendants. Thus, it was a mistake for the Court of
Appeals to have affirmed execution pending appeal based solely on the receivership of Urban Bank, when there
were eight other individual defendants, who were solidarily liable but were not shown to have been insolvent.
Since Urban Banks co-defendants were not found to have been insolvent, there was no good reason for the Court
of Appeals to immediately order execution pending appeal, since Atty. Peas award could have been satisfied by
the eight other defendants, especially when the de Leon Group filed its supersedeas bond.
It seems incongruous for Atty. Pea to be accorded the benefit of erroneously impleading several bank directors,
who had no direct hand in the transaction, but at the same time, concentrating solely on Urban Banks inability to
pay to justify execution pending appeal, regardless of the financial capacity of its other co-defendants. Worse, he
capitalized on the insolvency and/or receivership of Urban Bank to levy or garnish properties of the eight other
individual defendants, who were never shown to have been incapable of paying the judgment debt in the first place.
The disposition on the execution pending appeal may have been different had Atty. Pea filed suit against Urban
Bank alone minus the bank officers and the same bank was found solely liable for the award and later on declared
under receivership.
Urban Bank vs. Pea G.R. No. 145817 33 of 40

In addition, a judgment creditor of a bank, which has been ordered by the BSP to be subject of receivership, has to
fall in line like every other creditor of the bank and file its claim under the proper procedures for banks that have
been taken over by the PDIC. Under Section 30 of Republic Act No. 7653, otherwise known as the New Central
Bank Act, which prevailed at that time, once a bank is under receivership, the receiver shall immediately gather
and take charge of all the assets and liabilities of the bank and administer the same for the benefit of its creditors
and all of the banks assets shall be considered as under custodial legis and exempt from any order of garnishment,
levy, attachment or execution. In the Minute Resolution of the Monetary Board of the BSP, Urban Bank was not
only prevented from doing business in the Philippines but its asset and affairs were placed under receivership as
provided for under the same law. In fact, even Pea himself assured the PDIC, as receiver of Urban Bank, that he
would not schedule or undertake execution sales of the banks assets for as long as the bank remains in
receivership. Until the approval of the rehabilitation or the initiation of the liquidation proceedings, all creditors of
the bank under receivership shall stand on equal footing with respect to demanding satisfaction of their debts, and
cannot be extended preferred status by an execution pending appeal with respect to the banks assets:
[t]o execute the judgment would unduly deplete the assets of respondent bank to the obvious prejudice of other
creditors. After the Monetary Board has declared that a bank is insolvent and has ordered it to cease operations, the
Board becomes the trustee of its assets for the equal benefit of all the depositors and creditors. After its insolvency,
one creditor cannot obtain an advantage or preference over another by an attachment, execution or otherwise. Until
there is an approved rehabilitation or the initiation of the liquidation proceedings, creditors of the bank stand on
equal footing with respect to demanding satisfaction of their debts, and cannot be afforded special treatment by an
execution pending appeal with respect to the banks assets. (Emphasis supplied)
Moreover, assuming that the CA was correct in finding a reason to justify the execution pending appeal because of
the supervening event of Urban Banks closure, the assumption by the EIB of the liabilities of Urban Bank meant
that any execution pending appeal can be granted only if EIB itself is shown to be unable to satisfy Peas
judgment award of PhP28,500,000. That is not at all the case. In just one particular sale on execution herein, EIB
offered to answer in cash for a substantial part of Peas claims, as evidenced by EIBs capacity and willingness to
redeem the executed properties (condominium units sold to intervenor Unimega) by tendering managers checks
for more than PhP22 Million which is already 77.57% of Peas total award from the trial court. The fact that EIBs
offer to take over Urban Bank means it was able to satisfy the BSPs concern that all legitimate liabilities of Urban
Bank be duly discharged.
As an exception to the general rule that only final judgments may be executed, the grant of execution pending
appeal must perforce be based on "good reasons." These reasons must consist of compelling or superior
circumstances demanding urgency which will outweigh the injury or damages suffered, should the losing party
secure a reversal of the judgment or final order. The circumstances that would reasonably justify superior urgency,
demanding interim execution of Peas claims for compensation and/or damages, have already been settled by the
financial capacity of the eight other co-defendants, the approval of the supersedeas bonds, the subsequent takeover
by EIB, and the successor banks stable financial condition, which can answer for the judgment debt. Thus, Peas
interest as a judgment creditor is already well-protected.
While there is a general rule that a final and executory judgment in the main case will render moot and academic a
petition questioning the exercise of the trial courts discretion in allowing execution pending appeal, we find it
necessary to rule categorically on this question because of the magnitude of the aberrations that attended the
execution pending appeal in the Decision of the RTC-Bago City.
Urban Bank vs. Pea G.R. No. 145817 34 of 40

Irregularities in the Levy and Sale on Execution Pending Appeal


Assuming that the Special Order granting execution pending appeal were valid, issues have been raised on alleged
irregularities that mar the levy and sale on execution of the properties of Urban Bank and its officers and directors.
Many of the facts have not been sufficiently litigated before the trial and appellate courts for us to fully rule on the
issue, nevertheless, from what is on record, the following are the observations of this Court:
First, contrary to the general rules on execution, no opportunity was given to Urban Bank or the other co-
defendants to pay the judgment debt in cash or certified check. Before proceeding on the levying and garnishing
personal and real properties, demand must be made by the sheriff against the judgment debtors, Urban Bank and
the eight other individual bank officers, for the immediate payment of the award subject of the execution pending
appeal. It has not been shown whether Urban Bank and its officers and directors were afforded such an opportunity.
Instead of garnishing personal properties of the bank, the sheriff inexplicably proceeded to levy substantial real
properties of the bank and its officers at the onset.
Second, assuming that Urban Bank and its officers did not possess sufficient cash or funds to pay for the judgment
debt pending appeal, they should have been given the option to choose which of their properties to be garnished
and/or levied. In this case, Urban Bank exercised its option by presenting to the sheriff various parcels of land,
whose values amount to more than PhP76,882,925 and were sufficient to satisfy the judgment debt. Among those
presented by the bank, only the property located in Tagaytay was levied upon by the sheriff. No sufficient reason
was raised why the banks chosen properties were rejected or inadequate for purposes of securing the judgment
debt pending appeal. Worse, the Sheriff proceeded with garnishing and levying on as many properties of Urban
Bank and its officers, in disregard of their right to choose under the rules.
Third, the public auction sales conducted in the execution pending appeal sold more properties of Urban Bank and
the directors than what was sufficient to satisfy the debt. Indeed, the conservative value of the properties levied
herein by the sheriff amounting to more than PhP181,919,190, consisting of prime condominium units in the heart
of the Makati Business district, a lot in Tagaytay City, shares in exclusive clubs, and shares of stock, among others,
was more than sufficient to answer for the PhP28,500,000 judgment debt six times over. Rather than stop when the
properties sold had approximated the monetary award, the execution sale pending appeal continued and unduly
benefitted Atty. Pea, who, as judgment creditor and, at times, the winning bidder, purchased most of the properties
sold.
Fourth, it was supremely disconcerting how Urban Bank, through its successor EIB, was unduly deprived of the
opportunity to redeem the properties, even after presenting managers checks equal to the purchase price of the
condominium units sold at the execution sale. No reason was offered by the trial court or the sheriff for rejecting
the redemption price tendered by EIB in order to recover the properties executed and sold in public auction
pending appeal.
Finally, the Court cannot turn a blind eye to the fact that there was already a sufficient supersedeas bond given to
answer for whatever monetary award will be given in the end. To recall, the De Leon Group had already tendered a
supersedeas bond of PhP40,000,000 in the Court of Appeals to prevent execution pending appeal over their
properties. In fact, even Urban Bank tendered a separate supersedeas bond of equal amount with this Court, for a
total of PhP80,000,000 to secure any judgment to be awarded to Atty. Pea. That execution sales over the
properties of judgment debtors proceeded despite the three-fold value of securities compared to the amount of the
award indicates bad faith, if not malice, with respect to the conduct of the execution pending appeal.
Urban Bank vs. Pea G.R. No. 145817 35 of 40

Inasmuch as the RTC Decision has already been vacated and an independent finding has been made by this Court
of the complete nullity of the order granting execution pending appeal, it follows that all acts pursuant to such
order and its writ are also void. It does not follow however, that the Courts Decision in Co v. Sillador, is nullified,
inasmuch as an equally-important legal doctrine the immutability of Supreme Court final decisions is also to be
considered. In any case, the factual circumstances and the ruling on that case were limited to the actions of Sheriff
Allan Sillador with respect to properties levied under the same Special Order and Writ of Execution, which were
subject of third party claims made by the spouses of Teodoro Borlongan, Corazon Bejasa and Arturo Manuel, Jr. It
does not encompass other specific events and acts committed in the course of the execution pending appeal that
may warrant administrative or disciplinary actions. Having said that, this Court leaves it to the parties to explore
avenues for redress in such a situation.
The observation on the irregularities above-enumerated are made for the purpose of correcting the injustice that has
been committed herein, by allowing the Court to pursue the question of who was responsible for such gross
violation of the rules on execution, and for the Court to find measures to improve the safeguards against abuse of
court processes. It is for this reason that the Office of the Court Administrator will be given a special task by the
Court on this matter. Judge Henry Trocino of RTC-Bago City, who issued the Special Order and had supervisory
authority over the proceedings of the execution pending appeal, would have been included under such
administrative investigation by the Office of the Court Administrator, were it not for his retirement from the
judicial service.
The Courts Suspension Order of Execution Pending Appeal
Acting on Atty. Peas Omnibus Motion dated 09 December 2002 and Unimegas Motion for Reconsideration
dated 10 December 2002 with respect to the Courts Order dated 13 November 2002 that clarified the earlier stay
order against the execution pending appeal, the Court hereby denies both motions. The Court is fully correct in
suspending the period for the running of the redemption period of the properties of Urban Bank and its officers and
directors that were levied and subject of execution sale to satisfy the judgment debt in favor of Atty. Pea, the
Court having conclusively determined that the supersedeas bond filed was sufficient and considering the
subsequent finding that the said execution pending appeal lacks any sufficient ground for the grant thereof.
As to the theory of Atty. Pea that the actuations of Justice Carpio, the then ponente of this case, in drafting the
questioned Order should positively impact his motion for reconsideration of the same, the Court finds this
argument utterly devoid of merit.
In the first place, that questioned Order was not the decision of only a single member of the Court, Justice Carpio,
but of the entire division to which he belonged, then composed of retired Chief Justice Hilario Davide, Justices
Jose Vitug, Consuelo Ynares-Santiago and Adolfo Azcuna. This Order was affirmed by the same Division as its
duly-promulgated order. In relation to this, the affirmation by the Division of this Order demonstrates that there is
no truth to Atty. Peas claim that Justice Carpio fabricated the Order.
In the second place, Atty. Peas claim of undue interest against Justice Carpio specifically with respect to the latter
having the instant case transferred to his new Division, is based on ignorance of the system of assignment of cases
in the Supreme Court. When a reorganization of the Court takes place in the form of a change in the composition of
Divisions, due to the retirement or loss of a member, the Justices do not thereby lose their case assignments but
bring the latter with them to their new Divisions. The cases are then transferred to the Justices new Divisions, by
way of the corresponding request from each justice. Each justice is in fact, required to make this request, otherwise
Urban Bank vs. Pea G.R. No. 145817 36 of 40

the rollo of the cases of which he is Member-in-Charge will be retained by a Division in which he is no longer a
member. Indeed, Atty. Peas imagination has gotten the better of him.
Thirdly, his insinuation (which he denies) that Justice Carpio may have been bribed because the latter has a new
Mercedes Benz is highly offensive and has no place where his points should have been confined to legal reasons
and arguments.
Incidentally, Atty. Pea has voiced the fear in the Letter of Complaint filed in the Courts Committee on Ethics and
Ethical Standards, which he brought against the ponente of this Decision, that she will suppress material
information regarding the issuance of the Order suspending the redemption period because of her close relationship
to Justice Carpio. Contrary to this fear, this Decision is frontally disposing of this claim by stating that there is no
basis to believe that the questioned Order was anything than the joint decision of the five members of the then First
Division, and that his arguments in his motion to reconsider does not persuade this Court to vary in any form the
questioned order. Moreover, our disposition of this case renders moot his motion to reconsider the order.
It must be emphasized that the prolonged resolution of the procedural issue in the Petitions in G. R. Nos. 145817
and 145822 on the execution pending appeal is due in no small part to the delays arising from Peas peculiar
penchant for filing successive motions for inhibition and re-raffle. The Court cannot sanction Peas repeated
requests for voluntary inhibition of members of the Court based on the sole ground of his own self-serving
allegations of lack of faith and trust, and would like to reiterate, at this point, the policy of the Court not to tolerate
acts of litigants who, for just about any conceivable reason, seek to disqualify a judge (or justice) for their own
purpose, under a plea of bias, hostility, prejudice or prejudgment. The Court cannot allow the unnecessary and
successive requests for inhibition, lest it opens the floodgates to forum-shopping where litigants look for a judge
more friendly and sympathetic to their cause than previous ones.
Restitution of the Banks Executed Properties
The Court is still confronted with the supervening acts related to the execution pending appeal and the reversal of
the award of damages, which affect the rights of the parties as well as of the intervenors to the case, specifically,
intervenor Unimega. In completely resolving the differing claims and performing its educational function, the
Court shall briefly encapsulate and restate the operational rules governing execution pending appeal when there has
been a reversal of the trial courts Decision on the award of damages in order to guide the parties as well as the
bench and bar in general. The necessity of making these detailed instructions is prompted by the most natural
question an ordinary person with a sense of justice will ask after reading the facts: How can an obligation to pay
for the services of a lawyer so that 23 unwanted tenants leave a corporation's property lead to the loss or the
impairment of use of more than PhP181 Million worth of properties of that corporation and of its officers and
directors? Obviously, this Court must undertake corrective actions swiftly.
The rule is that, where the executed judgment is reversed totally or partially, or annulled on appeal or otherwise
the trial court may, on motion, issue such orders of restitution or reparation of damages as equity and justice may
warrant under the circumstances. The Rules of Court precisely provides for restitution according to equity, in case
the executed judgment is reversed on appeal. "In an execution pending appeal, funds are advanced by the losing
party to the prevailing party with the implied obligation of the latter to repay the former, in case the appellate court
cancels or reduces the monetary award."
In disposing of the main case subject of these Petitions, the Court totally reversed the staggering amount of
Urban Bank vs. Pea G.R. No. 145817 37 of 40

damages given by the trial court, and limited on a quantum meruit basis the agents compensation to PhP4,500,000
only. However, properties of Urban Bank and individual petitioners have been garnished and levied upon in the
amount of supposedly more than PhP85,399,350.
Applying the foregoing rules, petitioner-respondent bank is entitled to complete and full restitution of its levied
properties, subject to the payment of the PhP4,500,000. Meanwhile, petitioners bank officers, all of whom have not
been found individually or solidarily liable, are entitled to full restitution of all their properties levied upon and
garnished, since they have been exonerated from corporate liability with respect to the banks agency relationship
with Pea.
Considering the monetary award to Pea and the levy on and execution of some of its properties pending appeal,
Urban Bank, now EIB, may satisfy the judgment in the main case and at the same time fully recover all the
properties executed owing to the complete reversal of the trial courts awarded damages. It must immediately and
fully pay the judgment debt before the entire lot of levied properties, subject of the execution pending appeal, is
restored to it.
Due to the complete reversal of the trial courts award for damages, which was the basis of the Special Order and
Writ of Execution allowing execution pending appeal, intervenor Unimega and other bidders who participated in
the public auction sales are liable to completely restore to petitioner-respondent bank all of the properties sold and
purchased therein. Although execution pending appeal is sanctioned under the rules and jurisprudence, when the
executed decision is reversed, the premature execution is considered to have lost its legal bases. The situation
necessarily requires equitable restitution to the party prejudiced thereby. As a matter of principle, courts are
authorized at any time to order the return of property erroneously ordered to be delivered to one party, if the order
is found to have been issued without jurisdiction.
As a purchaser of properties under an execution sale, with an appeal on the main case still pending, intervenor
Unimega knew or was bound to know that its title to the properties, purchased in the premature public auction sale,
was contingent on the outcome of the appeal and could possibly be reversed. Until the judgment on the main case
on which the execution pending appeal hinges is rendered final and executory in favor of the prevailing judgment
creditor, it is incumbent on the purchasers in the execution sale to preserve the levied properties. They shall be
personally liable for their failure to do so, especially if the judgment is reversed, as in this case. In fact, if specific
restitution becomes impracticable such as when the properties pass on to innocent third parties the losing party
in the execution even becomes liable for the full value of the property at the time of its seizure, with interest. The
Court has ruled:
When a judgment is executed pending appeal and subsequently overturned in the appellate court, the party who
moved for immediate execution should, upon return of the case to the lower court, be required to make specific
restitution of such property of the prevailing party as he or any person acting in his behalf may have acquired at the
execution sale. If specific restitution becomes impracticable, the losing party in the execution becomes liable for
the full value of the property at the time of its seizure, with interest.
While the trial court may have acted judiciously under the premises, its action resulted in grave injustice to the
private respondents. It cannot be gainsaid that it is incumbent upon the plaintiffs in execution (Arandas) to return
whatever they got by means of the judgment prior to its reversal. And if perchance some of the properties might
have passed on to innocent third parties as happened in the case at bar, the Arandas are duty bound nonetheless to
return the corresponding value of said properties as mandated by the Rules. (Emphasis supplied)
Urban Bank vs. Pea G.R. No. 145817 38 of 40

In this case, the rights of intervenor Unimega to the 10 condominium units bought during the public auction sale
under the Special Order are rendered nugatory by the reversal of the award of unconscionable damages by the trial
court. It cannot claim to be an innocent third-party purchaser of the levied condominium units, since the execution
sale was precisely made pending appeal. It cannot simply assume that whatever inaction or delay was incurred in
the process of the appeal of the main Decision would automatically render the remedy dilatory in character.
Whatever rights were acquired by intervenor Unimega from the execution sale under the trial courts Special
Orders are conditional on the final outcome of the appeal in the main case. Unlike in auction sales arising from
final and executory judgments, both the judgment creditor and the third parties who participate in auction sales
pending appeal are deemed to knowingly assume and voluntarily accept the risks of a possible reversal of the
decision in the main case by the appellate court.
Therefore, intervenor Unimega is required to restore the condominium units to Urban Bank. Although the
intervenor has caused the annotation of the sale and levied on the titles to those units, the titles have remained
under the name of the bank, owing to the supersedeas bond it had filed and the Courts own orders that timely
suspended the transfer of the titles and further execution pending appeal.
The obligation to restore the properties to petitioner-respondent bank is, however, without prejudice to the
concurrent right of intervenor Unimega to the return of the PhP10,000,000 the latter paid for the condominium
units, which Pea received as judgment creditor in satisfaction of the trial courts earlier Decision. Consequently,
intervenors earlier request for the issuance of a writ of possession over those units no longer has any leg to stand
on. Not being entitled to a writ of possession under the present circumstances, Unimegas ex parte petition is
consequently denied.
Upon the reversal of the main Decision, the levied properties itself, subject of execution pending appeal must be
returned to the judgment debtor, if those properties are still in the possession of the judgment creditor, plus
compensation to the former for the deprivation and the use thereof. The obligation to return the property itself is
likewise imposed on a third-party purchaser, like intervenor Unimega, in cases wherein it directly participated in
the public auction sale, and the title to the executed property has not yet been transferred. The third-party purchaser
shall, however, be entitled to reimbursement from the judgment creditor, with interest.
Considering the foregoing points, the Court adopts with modification the rules of restitution expounded by retired
Justice Florenz D. Regalado in his seminal work on civil procedure, which the appellate court itself cited earlier. In
cases in which restitution of the prematurely executed property is no longer possible, compensation shall be made
in favor of the judgment debtor in the following manner:
a. If the purchaser at the public auction is the judgment creditor, he must pay the full value of the property
at the time of its seizure, with interest.
b. If the purchaser at the public auction is a third party, and title to the property has already been validly and
timely transferred to the name of that party, the judgment creditor must pay the amount realized from the
sheriffs sale of that property, with interest.
c. If the judgment award is reduced on appeal, the judgment creditor must return to the judgment debtor
only the excess received over and above that to which the former is entitled under the final judgment, with
interest.
In summary, Urban Bank is entitled to complete restoration and return of the properties levied on execution
Urban Bank vs. Pea G.R. No. 145817 39 of 40

considering the absolute reversal of the award of damages, upon the payment of the judgment debt herein
amounting to PhP4,500,000, with interest as indicated in the dispositive portion. With respect to individual
petitioners, they are entitled to the absolute restitution of their executed properties, except when restitution has
become impossible, in which case Pea shall be liable for the full value of the property at the time of its seizure,
with interest. Whether Urban Bank and the bank officers and directors are entitled to any claim for damages against
Pea and his indemnity bond is best ventilated before the trial court, as prescribed under the procedural rules on
execution pending appeal.
WHEREFORE, the Court DENIES Atty. Magdaleno Peas Petition for Review dated 23 April 2004 (G. R. No.
162562) and AFFIRMS WITH MODIFICATION the Court of Appeals Decision dated 06 November 2003 having
correctly found that the Regional Trial Court of Bago City gravely abused its discretion in awarding
unconscionable damages against Urban Bank, Inc., and its officers. The Decision of the Regional Trial Court of
Bago City dated 28 May 1999 is hence VACATED.
Nevertheless, Urban Bank, Inc., is ORDERED to pay Atty. Pea the amount of PhP3,000,000 as reimbursement for
his expenses and an additional PhP1,500,000 as compensation for his services, with interest at 6% per annum from
28 May 1999, without prejudice to the right of Urban Bank to invoke payment of this sum under a right of set-off
against the amount of PhP25,000,000 that has been placed in escrow for the benefit of Isabela Sugar Company, Inc.
The Complaint against the eight other individual petitioners, namely Teodoro Borlongan (+), Delfin C. Gonzales,
Jr., Benjamin L. de Leon, P. Siervo G. Dizon, Eric L. Lee, Ben Y. Lim, Jr., Corazon Bejasa, and Arturo Manuel, Jr.,
is hereby DISMISSED.
The Petitions for Review on Certiorari filed by petitioners Urban Bank (G. R. No. 145817) and Benjamin L. de
Leon, Delfin Gonzalez, Jr., and Eric L. Lee (G. R. No. 145822) are hereby GRANTED under the following
conditions:
a. Urban Bank, Teodoro Borlongan, Delfin C. Gonzalez, Jr., Benjamin L. de Leon, P. Siervo H. Dizon, Eric
L. Lee, Ben Y. Lim, Jr., Corazon Bejasa, and Arturo Manuel, Jr., (respondent bank officers) shall be restored
to full ownership and possession of all properties executed pending appeal;
b. If the property levied or garnished has been sold on execution pending appeal and Atty. Magdaleno Pea
is the winning bidder or purchaser, he must fully restore the property to Urban Bank or respondent bank
officers, and if actual restitution of the property is impossible, then he shall pay the full value of the
property at the time of its seizure, with interest;
c. If the property levied or garnished has been sold to a third party purchaser at the public auction, and title
to the property has not been validly and timely transferred to the name of the third party, the ownership and
possession of the property shall be returned to Urban Bank or respondent bank officers, subject to the third
partys right to claim restitution for the purchase price paid at the execution sale against the judgment
creditor;
d. If the purchaser at the public auction is a third party, and title to the property has already been validly and
timely transferred to the name of that party, Atty. Pea must pay Urban Bank or respondent bank officers
the amount realized from the sheriffs sale of that property, with interest from the time the property was
seized.
The Omnibus Motion dated 09 December 2002 filed by Atty. Pea and Motion for Reconsideration dated 10
Urban Bank vs. Pea G.R. No. 145817 40 of 40

December 2002 filed by Unimega with respect to the Courts Order dated 13 November 2002 is hereby DENIED.
The Office of the Court Administrator is ordered to conduct an investigation into the possible administrative
liabilities of Atty. Josephine Mutia-Hagad, the then RTC-Bago Citys Clerk of Court, and Allan D. Sillador, the
then Deputy Sheriff of Bago City, for the irregularities attending the execution pending appeal in this case,
including all judicial officers or sheriffs in the various places in which execution was implemented, and to submit a
report thereon within 120 days from receipt of this Decision.
The Office of the Court Administrator is also directed to make recommendations for the prevention of abuses of
judicial processes in relation to executions, especially those pending appeal, whether thru administrative circulars
from this Court or thru a revision of the Rules of Court, within 30 days from submission of the report on
administrative liabilities adverted to above. Let a copy of the Courts Decision in this case be sent to the Office of
the Court Administrator.
The Presiding Judge of RTC Bago City shall make a full report on all incidents related to the execution in this case,
including all returns on the writ of execution herein.
Because so much suspicious circumstances have attended the execution in this case by the Regional Trial Court of
Bago City, the proceedings with respect to any restitution due and owing under the circumstances shall be
transferred to the Regional Trial Court in the National Capital Region, Makati City, a court with venue to hear
cases involving Urban Bank/Export and Industry Bank whose headquarters is located in Makati City. The
Executive Judge of the Regional Trial Court of Makati City is ordered to include the execution of the Decision and
the proceedings for the restitution of the case in the next available raffle.
The Regional Trial Court of Makati City, to which the case shall be raffled, is hereby designated as the court that
will fully implement the restorative directives of this Decision with respect to the execution of the final judgment,
return of properties wrongfully executed, or the payment of the value of properties that can no longer be restored,
in accordance with Section 5, Rule 39 of the Rules of Court. The parties are directed to address the implementation
of this part of the Decision to the sala to which the case will be raffled.
No pronouncement as to costs.
SO ORDERED.
Brion, (Acting Chairperson), Villarama, Mendoza, and Perlas-Bernabe, JJ., concur.